Jaguar Land Rover Said to Plan Partnership with Chery for China Output

The companies have applied for regulatory clearance to establish the joint venture, the people said, declining to be identified because the deal has not been finalized.

The partnership may be officially announced as early as April at the Beijing auto show, they added.

JLR's owner, India's Tata Motors, said in May it had shortlisted unidentified partners in China to fuel expansion in the world's largest auto market.

China requires overseas carmakers to work with local manufacturers, who must own at least 50 % of joint ventures, to set up production. Locally built vehicles are cheaper because they're not subject to import duties.

"It's a smart move by Tata Motors," said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management. "It makes sense for Tata to have local production in China as it helps reduce the prices as well as cater supply more closely to the Chinese demand."

Jin Yibo, a spokesman for Wuhu, China-based Chery, said he had "no information to disclose" when contacted Thursday by phone.

Paul Chadderton, a Jaguar Land Rover spokesman based in Whitley, England, said there was "no news at this time" on the company's plans to produce cars in China.

China sales

In the first half of the fiscal year beginning April 1, Land Rover deliveries in China rose 63 % to 17,812 units, while Jaguar climbed 92 %, the company said in an investor presentation on its Web site.

The company expects China to become the second-largest market for Land Rover, and the third-largest market for Jaguar in the year ending March 31, the presentation added.

Chery, the sixth-largest automaker in China, was founded in 1997 and began making cars in 1999. The automaker assembles passenger cars, commercial vehicles and minivans.

Demand for premium brands in China continues to grow, despite a general slowdown in the global economy. German luxury-car manufacturers' sales last year were driven by strong demand in China, where they all posted sales gains of at least 30 %, led by a 65 % jump for Porsche.

Audi CEO Rupert Stadler estimated last month that China's car market, the world's biggest, will expand about 8 % in 2012.

Majority of revenue

Tata Motors paid $2.4 billion in June 2008 to buy the Jaguar and Land Rover brands from Ford and subsequently combined them into a single division. The unit generated 57 % of Tata Motors' revenue for the year ended March 31, 2011, up from 53 % the previous year.

Jaguar and Land Rover's global deliveries rose 45 % in December, the biggest monthly gain since June 2010, boosted by the new Range Rover Evoque SUV, Tata Motors said last month.

Their sales gained 22 % to 216,412 vehicles in the nine months through December. The Evoque, which was introduced in September, was named the North American truck of the year last month in Detroit. It received 32,000 initial orders, John Edwards, Land Rover brand director said in November.