MUMBAI Jaguar Land Rover (JLR) has finalized a joint venture agreement with Chery Automobile Co to manufacture and sell vehicles in China, the two companies said, as the luxury British brands look for further growth in the world's largest car market.
The agreement is a boost for JLR's efforts to further expand its clout in the fastest-growing major market for its sleek saloons and powerful SUVS, where luxury cars remain in hot demand even as the overall car market cools.
But the deal is just one step in a complex process.
JLR, owned by India's Tata Motors (TAMO.NS), and Chery are seeking regulatory approval for the 17.5 billion yuan ($2.78 billion) venture in eastern China, two people with direct knowledge of the deal told Reuters this month.
The joint venture will manufacture JLR- and JV-branded vehicles and engines, set up a research and development facility, and sell vehicles produced by the JV, the car makers said in a joint statement.
"This is an important step for JLR and Tata Motors moving forward," said Vineet Hetamasaria, auto analyst and PINC Research in Mumbai. "Though this is only an agreement, and it will be some time before we see the results."
The two companies will now follow the official process to form a joint venture company in the country.
Fuji Heavy Industries Ltd (7270.T), which wants to make its Subaru cars with Chery in China, submitted its deal for approval last year, but regulators have yet to announce a decision and it is unclear when, or whether, they will approve it.
JLR and Chery will look to leverage research and development, technology and manufacturing knowledge across the JV, the companies said.
"Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realize the potential of these iconic brands," JLR Chief Executive Officer Ralf Speth and Yin Tongyao, chairman of Chery, were quoted as saying in the statement.
(Reporting by Henry Foy; Editing by Aradhana Aravindan)