After nearly two years of on-and-off negotiations, Tata Motors has finally finalised a joint venture for its UK subsidiary Jaguar Land Rover (JLR) with China's state-owned Chery Automobile.

JLR and Wuhu, Anhui Province-based Chery, China's seventh-largest automaker by production, will form an equal JV to manufacture engines and set up a research and development centre in China.

''Jaguar Land Rover and Chery Automobile Company Ltd have reached agreement on a proposed joint venture in China. The agreement follows extensive talks between JLR and Chery on establishing an equal partnership company,'' JLR said in a statement.

In a joint statement, JLR's CEO, Dr Ralf Speth, and the Chery's chairman and CEO, Yin Tongyao, said, ''Working together on this proposed joint venture is an exciting prospect for both JLR and Chery.

''Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realise the potential of these iconic brands in the world's largest car market.''

JLR and Chery are now seeking regulatory approvals for the JV, but the two companies did not reveal the financial terms of the agreement.

Citing two sources with direct knowledge of the deal, Reuters had early this month reported that JLR and Chery are seeking regulatory approval for a $2.78-billion (17.5 billion yuan) JV in China (See: JLR, Chery Automobile seek Chinese approval for $2.78 bn venture).

It is understood that the JV will initially focus on Land Rover, however, Tata Motors has not committed any plans for the Jaguar, but intends to continue to import and sell it in China the way it is currently doing.

The two auto makers will also work on producing a new brand that will be built using their respective expertise.

The plant is probably being located in Changshu city, since JLR has recently been scouting for houses in the area with the help of a local real estate firm.

Located close to Shanghai, Changshu, once known for its rice, corn, wheat, tea, and mulberry leaves, has now become a favourite destination for foreign investors with over 2,000 overseas companies having invested in Changshu.

Many auto manufacturers have put up their parts production facilities and R&D centres in Jiangsu city.

Tata Motors first initiated talks with Chery in August 2010 for jointly producing JLR range of cars, but kept negotiations on the back-burner after realising that it would have to share technology with its Chinese partner.

The company later opened talks with state-owned Shanghai Automotive Industry Group (SAIC) and Hong Kong-listed Greatwall before coming back to Chery.

China is now Land Rover's second-largest market after the UK and is expected to become the biggest market in 2013. JLR has seen its sales in China picking up as the Chinese upper class have shown a penchant for Jaguar cars and Land Rover SUVs.

JLR now accounts for 10 per cent of all British exports to the Middle Kingdom.

Opening an assembly plant in China has been on the cards for JLR for quite some time as sales of its vehicles have picked up considerably since the past two years.

The booming auto market in China has led most global car manufacturers setting up plants in the country with local joint venture partners.

David Smith, the then CEO of JLR had said, ''We will need to manufacture some products overseas. If we are to get over 100-per cent tariff barriers in places like China, we will have to manufacture in China.'
 
Chery Automobile
Founded in 1997 as Anhui Chery Automobile Co by five of Anhui province state owned investment companies, Chery is the largest independent Chinese auto manufacturer and one of the fastest-growing in the world.

Chery possesses a full set of production and R&D units, such as factories, engine plants, transmission Factory, automotive engineering and research institute, planning and design institute and testing technology centre.

It has assets exceeding RMB 22 billion (approximately Rs175,780 crore), employs over 25,000 people and its current portfolio of cars include dozens of models under 10 cars series. It has operations in China, Asia, the Middle East, Africa, North America, South America, and Australia.

Chery has tie-ups for car design with Italy's design houses of Bertone and Pininfarina-designers for Ferrari and Lamborghini, AVL of Austria for engines including turbo-diesel engines, Bosch of Germany for designing modern transmission, Lotus Engineering-the UK-based racing car chassis maker for Chery's car design and quality and Ricardo Consulting Engineers of the UK for developing hybrid powertrain technology.

In 2010, Chery signed a memorandum of understanding with California-based Better Place, backed by venture capitals to collaborate on switchable-battery electric vehicle technology.