aguar Land Rover, the luxury vehicle unit of Tata Motors, plans to partner with Chery Automobile to build vehicles in China, two people with direct knowledge of the matter said.

The companies have applied for regulatory clearance to establish the joint venture, the people said, declining to be identified because the deal has not been finalised. The partnership may be officially announced as early as April at the Beijing auto show, they said.

Tata Motors said in May it had shortlisted unidentified partners in China to fuel expansion in the world’s largest auto market. China requires overseas carmakers to work with local manufacturers, who must own at least 50 per cent of joint ventures, to set up production. Locally built vehicles are cheaper because they’re not subject to import duties.

“It’s a smart move by Tata Motors,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management that oversees about $1.1 billion of emerging-market assets, including Tata Motors shares. “It makes sense for Tata to have local production in China as it helps reduce the prices as well as cater supply more closely to the Chinese demand.”

Jin Yibo, a spokesman for Wuhu, China-based Chery, said he had “no information to disclose”. Paul Chadderton, a Jaguar Land Rover spokesman based in Whitley, England, said there was “no news at this time” on the company’s plans to produce cars in China.

Land Rover deliveries in China rose 63 per cent to 17,812, while Jaguar climbed 92 per cent in the first half of the financial year beginning April 1, the company said in an investor presentation on its website. The company expects China to become the second-largest market for Land Rover, and the third-largest market for Jaguar in the year ending March 31, the presentation said.

Chery, the sixth-largest automaker in China, was founded in 1997 and began making cars in 1999, according to the company’s website. Chery assembles passenger cars, commercial vehicles and minivans, the website said.

Luxury carmakers are turning to China to boost growth. German luxury-car manufacturers’ sales last year were propelled by demand in China, where they all posted sales gains of at least 30 per cent, led by a 65 percent jump for Stuttgart-based Porsche. Audi chief executive officer Rupert Stadler estimated last month that China’s car market will expand about 8 percent in 2012.

Tata Motors paid $2.4 billion in June 2008 to buy the Jaguar and Land Rover brands from Ford Motor and subsequently combined them into a single division. The unit generated 57 per cent of Tata Motors’ revenue for the year ended March 31, 2011, up from 53 per cent the previous year.

Jaguar and Land Rover’s global deliveries rose 45 per cent in December, the biggest monthly gain since June 2010, boosted by the new Evoque compact sport-utility model, Tata Motors said last month. Their sales gained 22 per cent to 216,412 vehicles in the nine months through December.

The Range Rover Evoque, which was introduced in September, was named the North American truck of the year last month in Detroit.