Polestar is nearing a deal to go public through a merger with a special-purpose acquisition company that would value the Swedish electric-vehicle maker at $21 billion, according to people familiar with the matter.

Polestar, owned by Chinese car maker Zhejiang Geely Holding Group Co., is in advanced talks with Gores Guggenheim Inc. and could reach a deal by Monday, the people said, assuming talks don’t fall apart.

Polestar...

Polestar is nearing a deal to go public through a merger with a special-purpose acquisition company that would value the Swedish electric-vehicle maker at $21 billion, according to people familiar with the matter.

Polestar, owned by Chinese car maker Zhejiang Geely Holding Group Co., is in advanced talks with Gores Guggenheim Inc. and could reach a deal by Monday, the people said, assuming talks don’t fall apart.

Polestar focuses on high-performance electric cars, positioning itself as a rival to Tesla Inc. and Lucid Group Inc. Zhejiang Geely is controlled by its billionaire chairman and founder Li Shufu. It owns Geely Automobile Holdings Ltd. , Volvo Car Group and several other electric-vehicle brands.

As part of the deal, Polestar, whose existing investors include actor Leonardo DiCaprio, will receive an additional $250 million investment, some of the people said.

It would be one of the largest recent SPAC deals, following a burst of activity this year and last that has ebbed somewhat. Blank-check firms raise money in initial public offerings without a business and then look for one to combine with. Once they do so, they often raise additional funds in so-called PIPE deals, which stands for private investment in public equity.

Gores Guggenheim, sponsored by private-equity firm The Gores Group LLC and investment bank and asset manager Guggenheim Partners, raised about $800 million in a March IPO. Bloomberg reported in July that it was in talks with Polestar.

Polestar has endured setbacks as it aims to capitalize on a thirst for electric-vehicle innovation, including a recall last year of all of its global vehicles over faulty components. Polestar’s main production model, the Polestar 2, marketed as a competitor to Tesla’s Model 3, got off to a slow start in China. It sold more than 10,000 cars last year in markets around the world and expects to drastically increase that figure by 2025, with new models planned for launch in 2024, some of the people familiar with the matter said.

In June, the company said its third model, an SUV called the Polestar 3, would be assembled at a Volvo plant in South Carolina. The company’s other models have been made in China.

A handful of other high-profile electric-vehicle companies have gone public through SPAC deals, with varying degrees of success.

In July, Lucid concluded a merger with a SPAC helmed by deal maker Michael Klein. The transaction gave the Saudi-backed auto maker $4.4 billion at a valuation of $24 billion. Some smaller competitors such as Nikola Corp. , Lordstown Motors Corp. and Canoo Inc. have struggled with executive turnover, missed production targets and investigations from regulators since going public.

—Ben Foldy contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com