SAUDI Arabia’s sovereign wealth fund is in talks to invest at least US$250 million in Chinese electric-vehicle maker Human Horizons Group, people familiar with the matter said, as part of the kingdom’s efforts to build a domestic auto industry.

The Public Investment Fund (PIF) could buy into the Shanghai-based firm at a US$3 billion valuation, the people said, asking not to be identified as the discussions are private. An agreement may be reached as soon as this year, but could take longer as terms are still being finalised, they said. No final decisions have been made.

Human Horizons, which has been exploring strategic options, is weighing raising as much as US$1 billion from private investors to bolster growth, the people said. The firm has also been working with UBS Group and Morgan Stanley on a potential initial public offering, Bloomberg has reported.

Representatives for the PIF and Human Horizons declined to comment.

Any investment by the PIF would come amid a flurry of deals announced by the kingdom in the sector as part of efforts to diversify its economy away from oil. That includes a US$5.6 billion agreement with Human Horizons, whose top-end HiPhi sport utility vehicles can cost much as 800,000 yuan (S$148,877).

So far this year, oil-rich Saudi Arabia has also greenlit a manufacturing plant for its domestic EV brand, Ceer, and opened another with California-based Lucid Group Last month, Hyundai Motor Co. agreed to develop a car assembly plant near Jeddah, in partnership with the PIF.

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A deal with Human Horizons would also be another example of Saudi Arabia strengthening ties with China, its largest trading partner. Since President Xi Jinping’s landmark visit to the kingdom in December, Chinese executives have been emboldened to seek out Gulf investment and a potential role in Vision 2030 – the Saudi government’s plan to transform its economy.

Meantime, Chinese EV makers are attracting investment as they muscle into export markets, with BYD expanding aggressively into Asia, South America and Europe, along with the likes of Nio and SAIC Motor, which owns MG. Stellantis last month struck a US$1.1 billion deal for a stake in Chinese EV maker Zhejiang Leapmotor Technology, while Volkswagen in July agreed to take a US$700 million stake in Xpeng inc. BLOOMBERG