Jaguar Land Rover JLR has officially confirmed it is planning to set up a joint venture to manufacture in China.It will work with Chery, one of China’s largest car manufacturers to establish manufacturing operations. The move had been widely expected: JLR’s Chinese sales have boomed from under 3,000 a year in 2005 to 42,000 a year by 2011.

To get to the next level it needs to get around import duties that can be as high as 100%, so it needs to manufacture in the country, just like Audi, BMW and Mercedes-Benz.

With a booming domestic market and an apparently insatiable demand for luxury brands, JLR is convinced there is still huge untapped potential in China. It was very surprised by Chinese demand for the 2011 £120,000 Range Rover Ultimate Edition and is accordingly planning to push the next-generation Range Rover significantly upmarket.

The three big German brands all sell at least 200,000 cars a year in China, so it is not surprising JLR has big plans. In a joint statement, Dr Ralf Speth, JLR Chief Executive Officer, and Mr Yin Tongyao, Chairman and Chief Executive Officer of Chery Automobile Company Ltd, said:

“Working together on this proposed joint venture is an exciting prospect for both JLR and Chery. Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realise the potential of these iconic brands in the world’s largest car market.”