Tata Motors Ltd. (TTMT)’s Jaguar Land Rover unit and Chery Automobile Co. will invest 10.9 billion yuan ($1.75 billion) to build a manufacturing plant in eastern China and create a new brand to cater to the nation’s consumers.
The 50:50 venture will also set up a research and development center and construct an engine plant as part of the investment, according to a statement by Jaguar Land Rover. The company didn’t say in its release which models will be built at the new factory, targeted for completion in 2014.
“China is now our biggest market,” Ralf Speth, chief executive officer of Jaguar Land Rover, said at a press briefing yesterday after the groundbreaking ceremony for the factory in Changshu, Jiangsu province. “The Chinese economy has grown at a phenomenal rate in recent years and by any western standard, and I’m convinced that it is set to continue to grow at an astounding rate into the future.”
Jaguar Land Rover joins Volkswagen AG (VOW)’s Audi, Daimler AG (DAI)’s Mercedes-Benz and Bayerische Motoren Werke AG (BMW) in locating production in the world’s biggest vehicle market. The government requires overseas automakers to work with local companies to produce domestically and avoid the nation’s 25 percent import duty.
“Both parties need each other,” Bill Russo, president of Synergistic Ltd., said by phone from Beijing. “JLR needs to be localized because, quite frankly, their competition is localizing. It gives Chery an opportunity to really upgrade its capabilities in a time when it really needs that.”
Profit at Jaguar Land Rover rose 77 percent in the second quarter to 305 million pounds ($487 million). Surging China sales of Land Rover vehicles led by the Evoque have helped Speth offset slowing demand in Europe. The Gaydon, England-based unit said in May it will spend 2 billion pounds this year to expand under a plan to introduce 40 new or upgraded models in the next five years.
Jaguar Land Rover, which showed its first two-seat sports car in almost four decades at the Paris Motor Show in September, is targeting as much as 20 percent of the full-size sports car market, Steven de Ploey, the marketing head for Jaguar, said Sept. 27. The company will also begin deliveries next year of the new Range Rover SUV.
Jaguar Land Rover sold 25,176 vehicles in October, a 10 percent increase from a year earlier, driven by demand for the Evoque and Range Rover Sport. Combined sales in the first 10 months rose 35 percent to 294,291 vehicles.
At yesterday’s event in Changshu, Chery Auto Chairman Yin Tongyue told reporters that it is “not the right time” for an initial public offering for the closely held company.
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