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Tata Motors (TTMT) Ltd.’s Jaguar Land Rover aims to capture 10 percent of China’s premium SUV market as its first local plant allows the 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 110 kilometers (70 miles) northwest of Shanghai. The brand’s best-selling Range Rover Evoque will be its first local production model, according to Chief Executive Officer 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 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, the Gaydon, England-based division’s China president. Tata Motors is the latest foreign automaker to set up factories in the country to avoid duties that make imported vehicles less competitive.

JLR has said it expects local production to help cut prices by 15 percent, which may assist in extending a lead over Fiat Chrysler Automobiles NV (FCA)’s SUV-centric Jeep brand and narrow a gap with Volkswagen AG’s 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.”

SUV Market

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. 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.

The SUV market in China is dominated by Great Wall Motor Co. (2333)’s homegrown Haval line, Volkswagen’s Tiguan, and Japanese models such as Honda Motor Co. (7267)’s CR-V and Toyota Motor Corp. (7203)’s RAV4.

JLR’s sales in China climbed 39 percent to 66,505 vehicles in the first nine months of the year, according to company data. China’s total vehicle sales in September grew at the slowest pace in 19 months, dragged down by slumping demand for commercial vehicles.

Before the Changshu plant, all of the company’s 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. IHS predicts JLR will build the Freelander at the Changshu plant after the Evoque.

Antitrust Probe

The JLR factory opening comes after Chinese antitrust authorities pressured at least seven carmakers to cut prices in the wake of an investigation by China’s National Development and Reform Commission into how much foreign carmakers charge for vehicles and spare parts.

The government began looking into possible antitrust violations in the auto industry at the end of 2011 as state media accused manufacturers of inflating prices and overcharging consumers.

In July, JLR said it would cut prices on three imported models in China by an average of 200,000 yuan ($33,000) amid an industry investigation by the antitrust regulator.

The imported Evoque currently starts from 578,000 yuan, about the same as the Jeep Grand 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.

(An earlier version of this story was corrected to fix the spelling of SUV model.)

To contact Bloomberg News staff for this story: Siddharth Philip in Mumbai at [e-mail]; Alexandra Ho in Shanghai at [e-mail]

To contact the editors responsible for this story: Chua Kong Ho at [e-mail] Suresh Seshadri, Subramaniam Sharma

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