Jaguar Land Rover/Chery aims to capture 10% of Chinese SUV market.

Jaguar Land Rover aims to capture 10 percent of China's premium SUV market as its first local plant allows the UK luxury marque to cut prices and boost sales in the world's largest auto market.

JLR opened the 130,000-unit-a-year factory in Changshu city, about 110km (70 miles) northwest of Shanghai.

The brand's Range Rover Evoque will be its first local production model, according to CEO Ralf Speth. The carmaker plans to build three models in China by 2016, including a Jaguar, he said.

"It’s the biggest market on earth," Speth told reporters at an event today to inaugurate the plant. "Overall I’m quite optimistic that China will manage this growth."

The unit expects to sell 120,000 cars this year in China, which is already its biggest market, according to Bob Grace, JLR’s China president.

JLR will be competing in a market where demand for premium SUVs is forecast to double to 1.2 million units by 2020, with 18 brands competing for market share, according to IHS Automotive. In 2010, automakers sold 183,781 premium SUVs in China.

JLR aims to capture 10 percent of the premium SUV market with the Land Rover brand, according to Grace.

He said JLR's growth in China would slow to 20 percent this year compared with around 40 percent last year. Jaguar Land Rover’s sales in China climbed 39 percent to 66,505 vehicles in the first nine months, according to company data. "As our volume in absolute terms gets bigger and bigger, it becomes harder to keep doing the double-digit growth. I would expect next year to slow a little bit in comparison to this year." Grace told reporters at the new factory. "We will still see reasonable growth but it won't be the stellar growth we've seen in recent years," he said. Sales will, however, benefit from the new factory, he said.

The factory is equally owned by the British carmaker and local joint-venture partner Chery Automobile. Jaguar Land Rover and Chery have committed to investing 10.9 billion yuan ($1.78 billion) in the plant, which is scheduled to go into full production in 2016

JLR is the latest foreign automaker to set up factories in China to avoid duties that make imported vehicles less competitive. The new plant paves the way for Jaguar Land Rover to cut prices on its $94,000 Evoque. The company has said it expects local production to cut prices by 15 percent, which may help it extend a lead over Fiat Chrysler Automobiles' SUV-centric Jeep brand and narrow a gap with Audi.

"Land Rover has a unique positioning in the market as premium car sales are booming, as are SUV sales," said Yale Zhang, managing director of researcher Autoforesight Shanghai Co. "A lot of customers in China want to upgrade to premium cars. At the same time, there are enough premium sedans in China, so it won’t be easy for Jaguar Land Rover."

The SUV market in China is dominated by Great Wall Motor’s homegrown Haval line, Volkswagen’s Tiguan, and Japanese models such as the Honda CR-V and Toyota RAV4.

Before the Changshu plant, all Jaguar Land Rover vehicles sold in China were produced in the U.K. and imported, including the Land Rover Freelander, Range Rover, Range Rover Sport and Evoque, as well as the Jaguar XF, XJ and F-Type Jaguar. The imported Evoque currently starts from 578,000 yuan, about the same as the Grand Jeep Cherokee and more expensive than a larger, locally produced Audi Q5 that retails from 358,500 yuan, according to the brands’ websites.

Jeep plans to start production in China in the fourth quarter of next year. China's auto market grew in September at the slowest pace in 19 months. The market is in a state of flux with a government investigation into anti-competitive practices, prompting makers such as Jaguar Land Rover to lower prices.

Meanwhile the luxury segment has taken a hit by a government campaign against extravagance among public officials.

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