The new working agreement will be introduced in the first quarter of 2015 to align with the start of production of the second-generation XC90 luxury SUV, which debuted in August and goes on sale in Australia in May.
When fully implemented, Volvo's Torslanda plant will employ 4600 workers, representing an increase of almost 40 per cent.
The addition of the third shift follows the opening of a new body shop that lifted the production capacity at Torslanda to 300,000 annually.
The plant expansion and the XC90’s new Scalable Product Architecture platform are part of Volvo’s ongoing US$11 billion ($12.6b) investment program in new products and production capacity.
Volvo’s global sales were up 9.2 per cent in the first nine months of this year, and the brand’s 2014 projection of approximately 470,000 sales represents 10 per cent growth and an all-time record for the company.
The Volvo XC90 will cost between $89,950 and $122,950 when it reaches local shores in around six months’ time.