Polestar's first effort to raise funds outside of its parent company comes as the global auto industry continues investing in electric technologies after EV makers from Tesla Inc to Nio Inc report sustained sales growth.

The Sweden-based company is in final funding talks with Chinese investors including Beijing E-Town International Investment & Development, according to sources familiar with the matter. One of the sources said the investment would put Polestar's valuation at over $5 billion.

The funding will help Polestar expand production and its lineup, sources said. They declined to be named as the talks are private and cautioned the details are subject to change.

Polestar and Geely declined to comment. Beijing E-Town could not be immediately reached for comment.

Polestar builds hybrid performance cars in the western Chinese city of Chengdu and a sedan model at its Taizhou plant in the east. It also plans to begin production of the Precept, a larger, more environmentally friendly sedan displayed at this year's China auto show.

Reuters reported on Monday that Geely's new EV factory in China's western city of Chongqing will produce cars under the premium Polestar marque.

Hangzhou-based Geely is China's best known automaker globally. It owns Volvo Cars and Lotus, almost half of Proton and 9.7% of Daimler AG. Its Hong Kong-listed Geely Automobile Holdings Ltd is planning a Shanghai float.

(Reporting by Julie Zhu and Yilei Sun; Editing by Brenda Goh and Sam Holmes)

By Julie Zhu and Yilei Sun