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China’s Chery would use a British plant owned by Jaguar Land Rover to build cars under proposals backed by the UK government and to be discussed during Prime Minister Keir Starmer’s visit to Beijing next week.
Under the proposal, the Chinese company would use an existing manufacturing facility owned by JLR to make cars in Britain, according to two people familiar with the discussions. Britain has been actively encouraging Chery to make its vehicles in the country for the past few years, three people familiar with the talks said.
Although talks on the deal are at an early stage and details have yet to be finalised, Cherry and JLR will hold exploratory talks during Starmer’s visit to China, the first by a British prime minister in eight years. The delegation, which includes prominent business leaders, will arrive a week after Britain approved a Chinese “super embassy” in London, a plan that previously drew criticism in Washington amid heightened geopolitical tensions.
The Business Secretary, Peter Kyle, admitted that the government wanted Chery to manufacture in the UK and that using an existing JLR plant would be an option.
“If there is a manufacturing facility where there is under-capacity, then (…) there is an argument for creating a partnership and this could become one of them,” he told the FT.
A new JLR deal with Chery will be key for the government to achieve its target for the UK to produce 1.3 million vehicles annually by 2035, almost double the 738,000 units projected for 2025 by the Society of Motor Manufacturers and Traders.
Chery’s Omoda and Jacoo models are the fastest-growing Chinese brands in the UK, having attracted an influx of affordable vehicles from BYD and other Chinese carmakers shying away from high EU-imposed tariffs on China-made electric vehicles.
But while Omoda executives have not ruled out a new plant in the UK and are looking to build additional capacity, people close to the company have previously cited high energy and labor costs as the main hurdle to producing locally.
A manufacturing venture between a Western carmaker and a Chinese rival outside China is in the relatively global automotive industry. But analysts say the number of such deals is likely to increase in coming years, as plants in Europe grapple with sluggish demand and higher production costs.
Chery already has a plant in Barcelona, which it acquired from Nissan, while it signed another deal on Friday to buy the Japanese carmaker’s plant in South Africa. Nissan has also not ruled out using its plant in Sunderland to fill spare capacity by its Chinese partner Dongfeng.
Chinese rival Leapmotor has also partnered with Stellantis and will begin production of the new model at a Spanish plant this year.
JLR, which is owned by India’s Tata Motors, already has a joint venture with Chery. In 2024, JLR agreed to license its Freelander brand to Chery to develop electric vehicles using the Chinese group’s platform.
JLR meanwhile is recovering from a devastating cyber attack last summer that caused losses of at least £196 million. Its car plants in Halewood and Solihull have resumed production after being closed for more than a month last year.
The company plans to launch an electric version of the Range Rover this year and relaunch Jaguar as an all-electric ultra premium brand.
Despite the planned new EV launches, David Bailey, professor of business economics at the University of Birmingham, said JLR’s plants will likely have spare capacity for one or two new models. For both JLR and Chery, producing vehicles at a factory at or near capacity will help reduce average costs.
“At a time when European plants are below capacity, this is a way to fill that space and get Chinese brands to produce in Europe,” Bailey said. “It’s a potential win-win.”
JLR declined to comment and Cherry was not immediately available for comment.
