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The Public Investment Fund - which invests on behalf of the Saudi government - said the outlay was aimed at funding the commercial launch of the Lucid Air model in 2020, pending regulatory approvals and closing conditions.

Saudi Arabia - the world's largest exporter of oil and a crucial US ally in the Middle East - has pushed to diversify its economy since the 2014 crude market crash.

The kingdom faces a budget deficit of more than $260 billion and has borrowed over $100 billion to help finance the shortfall.

The PIF has committed to $95 billion in investments in the past two years from firms like British tycoon Richard Branson's space tourism company Virgin Galactic to high-risk tech firms such as Tesla.

Tesla chief executive Elon Musk disclosed last month that he was in talks with Saudi Arabia's PIF and other investors to take the electric automaker private.

Musk said in a blog post on 13 August he had "no question" that the Saudis would finance such a transaction following a 31 July meeting.

He also revealed the PIF had bought almost five percent of Tesla stock through public markets.

His comments sparked speculation over whether he would need to borrow massive amounts of money to take Tesla private, a move that could allow the company to operate without requirements for financial reports and other pressures of a publicly traded firm.

They also raised questions about whether Musk ran afoul of securities laws by claiming backing without a firm financial commitment.

Tesla shares dropped some 1.9 percent in New York on Monday, when the news came out.