Jaguar Land Rover (JLR), the iconic UK carmaker owned by Tata Motors, is reportedly planning to start assembling vehicles in China, with a major part of its sales now coming from Asia.

Carl-Peter Forster, the new group CEO of Tata Motors, said in an interview to the BBC, "We will need to manufacture at least two models in China, we'll take one to two years to set it up, but first we will need a partner."

He made it clear that the company was not shifting its production out of the UK.

But opening an assembly plant in China has been on the cards for JLR for quite some time, where sales of its vehicles have picked up considerably since the past year.

When vehicle sales in the UK had plunged last year and JLR was reeling with cash flow problems to run its day-to-day operations, a Chinese trade delegation in to Europe signed a lifeline deal with JLR in February 2009 worth £600 million to purchase13,000 vehicles from JLR over the next three years. (See: China bails out JLR with £600-million order)

The important deal came at a time when the entire UK car industry, especially luxury car maker JLR had lowered production and introduced redundancies in response to the sharp decline in car sales due to drying up of bank loans.

The booming auto market in China has led most global car manufacturers to set up plants in the country with local joint venture partners. JLR has seen its sales in China picking up as the Chinese upper class have shown a penchant for Jaguar and Land Rover cars.
Jaguar sales in China grew by 38 per cent, while Land Rover 55 per cent year on year.

In October 2009, JLR had said that it could move some production to China in order to avoid import tariffs on British products by the Chinese government. (See: JLR may partly relocate production from the UK to beat Chinese tariffs)

China imposes a 10-per cent tariff on imported auto parts, but since April 2005, it has imposed a higher 25-per cent charge on the value of finished products.

It also slaps a 25-per cent tariff on the import of finished automobiles. But it has no problems if foreign car companies want to set up manufacturing facilities in China.

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.''

JLR sells more of its vehicles overseas than in the UK market and in the past two quarters, has sold more cars out of the eurozone.

Tata Motors today announced pre-tax profits of £32 million for JLR for the year up to March 2010 compared with a loss of £281 million for the preceding 10 months.