Jaguar Said to Invest as Much as $3 Billion With Chery

Tata Motors Ltd. (TTMT)’s Jaguar Land Rover luxury division and Chery Automobile Co. may invest as much as $3 billion over five years in their Chinese joint venture, two people familiar with the matter said.

The two companies will spend as much as $1 billion on a new factory, about $1 billion on establishing a China-specific brand and from $500 million to $1 billion on research and development, said one of the people, who declined to be identified because the plans have not yet been made public.

Jaguar Land Rover and Chery yesterday announced they will form a joint venture to build the U.K. company’s models in China, following carmakers including Daimler AG, General Motors Co. (GM) and Volkswagen AG in setting up manufacturing in the world’s largest auto market. China requires overseas automakers to work with local companies, who must own at least 50 percent of joint ventures, to set up production. Locally built vehicles are cheaper because they’re not subject to import duties.

“Having a local assembly unit will help cut waiting lists and production costs,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management which oversees about $1.1 billion of emerging-market assets including Tata Motors. “A China-specific brand makes sense as you can target consumers looking to upgrade to Jaguar and Land Rover products.”

Chinese Approval Needed

Tata Motors’ shares rose 1.7 percent to 276.10 rupees at the close of trade in Mumbai yesterday. The shares have gained 55 percent this year, making the company the best performing stock on the benchmark BSE India Sensitive Index this year.

The planned partnership between JLR and Chery has yet to receive government approval, the two companies said yesterday in a press release. The business will also include a research and development facility and build engines. Paul Chadderton, a JLR spokesman in Whitley, England, and Jin Yibo, Chery’s spokesman, declined to comment beyond the statement.

“We believe that JLR and Chery can jointly realize the potential of these iconic brands in the world’s largest car market,” the two companies said. “Demand for Jaguar and Land Rover vehicles continues to increase significantly in China.”

Jaguar Land Rover said March 13 that it was adding as many as 1,000 jobs and moving to three-shift, 24-hour production at its Halewood plant near Liverpool, England, to meet surging demand for its luxury SUV models such as the Range Rover Evoque.