Jaguar Land Rover group lineup in 2011

Jaguar Land Rover group lineup in 2011

Jaguar Land Rover has reached an agreement with Chery over plans to form a joint venture in China, paving the way for Jaguar Land Rover to start production of its own vehicles in the world’s biggest new car market.   

The agreement follows extensive talks between Jaguar Land Rover and Chery on establishing an equal partnership company.

In a joint statement, Jaguar Land Rover chief Dr Ralf Speth and Chery CEO Mr Yin Tongyao said:

"Working together on this proposed joint venture is an exciting prospect for both Jaguar Land Rover and Chery. 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 in the world's largest car market.”

The scope of the proposed joint venture includes the manufacture of Jaguar and Land Rover vehicles in China; the establishment of a research and development facility; engine manufacture; and the sale of Jaguar and Land Rover models in more showrooms across the country.

The agreement is now awaiting regulatory approval from the Chinese government and other significant stakeholders.

The importance of the Chinese market to Jaguar Land Rover is obvious. In 2005, sales in China accounted for 1 percent of combined Jaguar and Land Rover sales. It’s now the third largest market for the British brands, and is still growing--annual sales in 2011 increased by 60 percent, to 42,000.

Chery is a manufacturer of a whole range of vehicles, including compacts, SUVs, and commercial vehicles. The Chinese automaker has made headlines on a number of occasions, most recently due to its failed partnership with Chrysler.

While Jaguar Land Rover is expected to benefit substantially from this latest alliance, there are dark clouds on the horizon. Bloomberg reported this week that luxury car sales in China are slowing, and that established brands such as Audi, BMW and Mercedes-Benz are offering as much as 25 percent in discounts to move previous top-sellers. The report points out that the luxury car market in China is maturing and that the margins dealers are making on high-end models are now approaching levels common to most western markets.