RIYADH -- Jaguar Land Rover today signed a letter of intent with Saudi Arabia's government to study the feasibility of setting up a factory to build its models locally.
The factory would build 50,000 Land Rovers a year in the kingdom, using locally produced aluminum and steel, the country's commerce and industry ministry said.
The initial investment of 4.5 billion riyals ($1.2 billion) may later be extended to build Jaguar models, said a press release distributed at the signing ceremony in the Saudi capital.
Jaguar Land Rover said discussions with the Saudi government are at a preliminary stage. "This is an exciting project that could enable Jaguar Land Rover to establish a joint venture partnership in a part of the world where luxury vehicle sales are expected to rise," CEO Ralph Speth said in a statement. "If we proceed, it will complement our existing expansion in the UK and elsewhere."
Asked about the $1.2 billion number in the Saudi government release, Speth said: "I can't make any statement for these kind of investment figures. We have just signed a letter of intent. It's a letter of intent to investigate the project."
The proposed plant will likely start up in 2017 and will be located in Yanbu on the kingdom's Red Sea coast, said Azzam Shalabi, head of the Saudi commerce and industry ministry's industrial clusters program.
Jaguar Land Rover, which is owned by India's Tata Motors, is turning to emerging markets to offset slowing demand in Europe. The company is expanding its assembly operations in India and in September announced that it had received approval to form a venture with China's Chery Automobile Co. to begin building cars in the world's biggest auto market.
Jaguar Land Rover's strong sales growth in emerging markets has contributed to a 32 percent increase in global sales to 324,184 vehicles in the first 11 months. In the current calendar year, the automaker's sales in the Middle East and North Africa have increased by more than 9 percent to 11,418 units.
Jaguar Land Rover, based in Gaydon, England, accounted for 67 percent of Tata Motors' revenue in the three months ended Sept. 30. Tata plans to invest 2 billion pounds ($3.2 billion) in the brands this year to develop new models and expand factories.
Saudi Arabia is seeking to develop local industry to diversify its economy to reduce reliance on oil exports.
Bloomberg and Reuters contributed to this report