Jaguar Land Rover and the Chinese automaker Chery Automobile Company — both properties of India-based Tata Motors — finalized paperwork Tuesday to enter into a joint venture producing cars and engines in China.
Approval needed from Chinese regulators
According to Reuters, the two companies are seeking approval from Chinese industry regulators for the $2.78 billion venture. If approved, the two automakers will assemble and sell Jaguar, Land Rover and Chery vehicles and engines together in the Asian nation.
Foreign automakers must partner with locals
Chinese industry regulators require off-shore automakers to involve local Chinese companies by forming joint ventures in which the Chinese partner owns at least 50 percent of the venture.
An important step
Vineet Hetamasaria, an auto industry analyst in Mumbai, said:
“This is an important step for Jaguar Land Rover and Tata Motors moving forward. Though this is only an agreement, and it will be some time before we see the results.”
Allocating the investment
Two unnamed sources told Reuters that the two companies plan to spend $1 billion on a factory and another $1 billion on developing a new model specifically for China.
Juergen Maier, a manager at Vienna-based Raiffeisen Capital Management, said:
“A China-specific brand makes sense as you can target consumers looking to upgrade to Jaguar and Land Rover products.”
Research and development
The bulk of the rest of the investment will go into research and development. Any products developed by the partnership will be jointly owned and sold.
An eye on China
Land Rover, in an effort to boost its world sales, has expressed interest in moving into the Chinese market for some time now. Although auto sales have cooled somewhat in China, the world’s largest automotive market still has a rising demand for luxury vehicles.
Jaguar Land Rover said in a statement:
“Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that Jaguar Land Rover and Chery can jointly realize the potential of these iconic brands.”
Other automakers in China
In 2011, Subaru’s parent company, Fuji Heavy Industries Ltd, also petitioned Chinese regulators for a joint venture to produce its cars with Chery in China. There has been no decision announced in that proposed partnership. Daimler AG, General Motors Co. and Volkswagen AG all have plants in the Asian nation.