MUMBAI -- Jaguar Land Rover has finalized a joint venture agreement with Chery Automobile to manufacture and sell vehicles in China, the two companies said, as the luxury British brands look for further growth in the world's largest car market.
The agreement is a boost for Jaguar Land Rover's efforts to further expand its clout in the fastest-growing major market, where luxury models remain in hot demand even as the overall car market cools.
But the deal is just one step in a complex process.
Jaguar Land Rover, owned by India's Tata Motors, and Chery are seeking regulatory approval for the joint venture in eastern China, two people with direct knowledge of the deal told Reuters this month.
The joint venture will manufacture Jaguar Land Rover- and JV-branded vehicles and engines, set up an r&d facility, and sell vehicles produced by the joint venture, the automakers said in a joint statement.
The two companies may invest as much as $3 billion over five years in the venture, two people familiar with the matter said on Wednesday.
As much as $1 billion could be spent on a new factory, about $1 billion on establishing a China-specific brand and from $500 million to $1 billion on research and development, said one of the people, who declined to be identified because the plans have not yet been made public.
"This is an important step for JLR and Tata Motors moving forward," said Vineet Hetamasaria, auto analyst and PINC Research in Mumbai. "Though this is only an agreement, and it will be some time before we see the results."
The two companies will now follow the official process to form a joint venture company in the country.
Fuji Heavy Industries Ltd., which wants to make its Subaru cars with Chery in China, submitted its deal for approval last year, but regulators have yet to announce a decision and it is unclear when, or whether, they will approve it.
Jaguar Land Rover and Chery will look to leverage r&d, technology and manufacturing knowledge across the JV, the companies said.
"Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realize the potential of these iconic brands," Jaguar Land Rover CEO Ralf Speth and Yin Tongyao, chairman of Chery, said in a statement.
Jaguar Land Rover said March 13 that it was adding as many as 1,000 jobs and moving to three-shift, 24-hour production at its Halewood plant near Liverpool, England, to meet surging demand for its luxury SUV models such as the Range Rover Evoque.
Sources: Reuters and Bloomberg