Late in 1919, major shareholders and creditors intervened to save Scania-Vabis. Large assets were written off. A new managing director was appointed. But the disastrous trend continued. Early in 1920, production was paralysed by a strike, then the customers deserted the company. Scania-Vabis could not withstand the competition from imported standard vehicles. Its subsidiaries were also losing money. In the autumn of 1920, operations at one plant ceased, and in June 1921, another filed for bankruptcy. This was the fatal blow for Scania-Vabis, which suspended payments. Its employees were laid off and on 4 August 1921, after changing its name, the company was forced into liquidation.

To reduce the losses, a new company was established under the original name, AB Scania-Vabis. It took over materials, semi-finished goods and finished products for making engines and vehicles. The main intention of the owners was to sell off the large inventories and stores at the best possible prices. A handful of white-collar employees were engaged late in 1921. In 1922, the first fifteen workers were re-employed in Södertälje.

The new Scania-Vabis faced a difficult task. Virtually the entire sales and service organisation had closed. The company's vehicles, which originated from the pre-war period, were obsolete. Yet a ray of light pierced the darkness: its powerful, reliable, fuel-efficient engines. The newly-appointed managing director, Gunnar Lindmark, grasped at this straw, marketing the company's products to a small group of institutional customers like the Swedish Postal Administration and Customs Service, which had their own repair and maintenance workshops.

August Nilsson, a talented designer, was among the first white-collar employees to be re-employed. During 1915-17, he had developed four types of four-cylinder engines that were competitive well into the 1920s. They were being used without changes when he returned. As design manager, with a team of three, he began practising customer-controlled design and production.

As early as 1922, the Post Office placed its first order for 15 mail buses. This greatly contributed to the survival of Scania-Vabis. August Nilsson's small team worked together with Post Office technicians to design a bus that could negotiate snow-covered roads. The result was a 12-passenger bus. The Post Office's contribution in the development phase included a track-drive system for winter conditions. Rubber tracks were stretched over the rear wheels using small auxiliary pulleys.

Individual customer orders led to entirely new engine designs. For example, in 1929 the Customs Service ordered nine six-cylinder marine engines for its patrol boats. They were delivered the next year. The order opened a new product area: industrial and marine engines. Another important customer was Atlas Copco, which used a four-cylinder overhead valve engine in its compressor units.

August Nilsson's engine designs were one crucial reason why Scania-Vabis was also successful in one niche of the truck market during the 1920s. In 1922, he patented a new carburettor, which improved reliability and fuel economy. The following year, he designed a compact four-cylinder overhead valve engine that developed 60 hp after fine-tuning when burning a benzol-alcohol fuel mixture. This fast-accelerating, reliable and fuel-efficient engine was a success. In 1927, Scania-Vabis launched a six-cylinder variant which developed 100 hp after minor modifications. The company could then offer more powerful engines than both domestic and foreign competitors.

Meanwhile, truck designs were also modernising. Obsolescent chain drives were replaced by propeller-shaft drives and wheels equipped with rolling bearings. In 1925, Scania-Vabis unveiled the first truck in a new range made in Södertälje. It featured a four-cylinder overhead valve engine, four-stage gearbox, wet disc clutch, progressive suspension and closed cab. It was much faster and lighter and more fuel-efficient, reliable, easily serviced and comfortable than its predecessors. With its new range, Scania-Vabis was better equipped for a demanding truck segment. From 1925 on, Scania-Vabis sold more than 100 trucks per year.

Against all odds, and without further capital from its owners, Scania-Vabis survived. And by 1930, its accumulated losses were gone, its debts to the liquidated company paid and the machinery and premises in Södertälje had been transferred to the new company. That year, shareholders received their first dividend.