Jaguar Land Rover seals Chinese joint venture

Britain’s luxury car maker Jaguar Land Rover has sealed a joint venture with Chinese company Chery Automobile, marking £1.1bn of investment in the world’s second largest economy. JLR, owned by India’s Tata, exports more than 80 percent  of all the vehicles it makes and has been held up as a poster child of British automotive success by ministers

Jaguar Land Rover unit and Chery Automobile Co. will invest 10.9 billion yuan (£1.1bn) to build a new manufacturing plant in Changshu, near Shanghai, which is expected to open in 2014 and create a new brand to cater to the nation’s consumers.

The partnership will be known as Chery Jaguar Land Rover Automotive Company, and marks a formal commitment from JLR to China, which is already its third largest market behind the UK and the US.

The 50:50 venture will also set up a research and development center and construct an engine plant  as part of the investment, according to a statement by Jaguar Land Rover.

“China is now our biggest market,” Ralf Speth, chief executive officer of Jaguar Land Rover, said at a press briefing yesterday after the groundbreaking ceremony for the factory in Changshu, Jiangsu province. “The Chinese economy has grown at a phenomenal rate in recent years and by any western standard, and I’m convinced that it is set to continue to grow at an astounding rate into the future.”

Jaguar Land Rover joins Volkswagen AG’s  Audi, Daimler AG’s  Mercedes-Benz and Bayerische Motoren Werke AG (BMW) in locating production in the world’s biggest vehicle market. The government requires overseas automakers to work with local companies to produce domestically and avoid the nation’s 25 percent import duty.

“Both parties need each other,” Bill Russo, president of Synergistic Ltd., said by phone from Beijing. “JLR needs to be localized because, quite frankly, their competition is localizing. It gives Chery an opportunity to really upgrade its capabilities in a time when it really needs that.”

Profit at Jaguar Land Rover rose 77 percent in the second quarter to 305 million pounds ($487 million). Surging China sales of Land Rover vehicles led by the Evoque have helped Speth offset slowing demand in Europe. The Gaydon, England-based unit said in May it will spend 2 billion pounds this year to expand under a plan to introduce 40 new or upgraded models in the next five years.

Jaguar Land Rover, which showed its first two-seat sports car in almost four decades at the Paris Motor Show in September, is targeting as much as 20 percent of the full-size sports car market, Steven de Ploey, the marketing head for Jaguar, said Sept. 27. The company will also begin deliveries next year of the new Range Rover SUV.