Tata Motors' Jaguar Land Rover unit and Chery Automobile Co. have entered a 50:50 venture and intend to invest 10.9 billion yuan ($1.75 billion). The venture, which will develop a new brand, will construct a manufacturing plant in eastern China that’s expected to be done in 2014. In a press release, the companies said that a research and development center will also be set up.
This move isn’t surprising since Jaguar Land Rover does consider China to be its quickest-growing market. Other companies that have a factory in China (the world's biggest vehicle market) are Volkswagen Group's Audi, Daimler's Mercedes-Benz and BMW. The Chinese government demands that automakers partner with local firms to have domestic production and not be subject to the 25% import duty in the country.
When interviewed Bill Russo, president of Synergistic Ltd., said that the two parties “need each other.” JLR would also need to localize, similar to what its rivals are doing. On the other hand, Chery gets the capability to upgrade its facilities. In the second quarter, Jaguar Land Rover posted a 77% increase in profit to 305 million pounds ($487 million).
The Evoque led the JLR’s rising sales in China, helping to offset the decreasing demand in Europe. Last May, the Gaydon, England-based unit said that it aims to use up 2 billion pounds this year for its expansion, which includes a five-year plan to launch 40 new or upgraded models. Last September 27, Jaguar marketing head Steven de Ploey said that the company aims to have up to a 20% share of the full-sized sports car market. JLR had presented its first two-seat sports car in nearly four decades at last September’s Paris Auto Show.
In a joint statement, at today's press conference in Jiangsu, Dr. Ralf Speth, Jaguar Land Rover Chief Executive Officer, and Mr Yin Tongyao, Chairman and Chief Executive Officer of Chery Automobile Company Ltd, said: "We are delighted to have reached this milestone, achieved thanks to the understanding and foresight of the Chinese authorities and we want to thank them for recognising the potential of our joint venture in the fast-growing Chinese market. "Together, we will now begin working in close collaboration on our partnership plans to harness the capabilities of our respective companies, to produce relevant, advanced models for Chinese consumers."