OREANDA-NEWS. October 31, 2012.   Jaguar Land Rover PLC, a unit of India's Tata Motors Ltd., 500570.BY -1.82% said Monday that a Chinese government agency has cleared its proposal to set up a joint venture with China's Chery Automobile Co.

The approval paves the way for the U.K.-based luxury-car maker to expand its presence in China, the world's biggest automobile market by sales.

"Jaguar Land Rover and Chery Automobile Co. Ltd. can confirm that the joint-venture project application has been cleared by the National Development and Reform Commission," said Del Sehmar, a spokesman for JLR.

The two companies will be starting the process of incorporating the joint venture, Mr. Sehmar added. He said they would announce details of the venture after they get a formal approval letter from the Chinese agency.

JLR has been counting on sales volume in growing auto markets like China to offset contracting demand in Europe. In August, its chief executive, Ralf Speth, said the company had a low market share in China, and there was considerable potential for growth.

On Sunday, China's Association of Automobile Manufacturers predicted the Chinese market would have an annual growth rate of at least 7% in coming years, the same as the country's economic growth targets for 2011-2015.

Between April and September, JLR's retail vehicle sales in China totaled 35,617 vehicles, accounting for the biggest chunk—21%—of its world-wide sales. The U.K. was a close second, accounting for 19% of its sales.

JLR and Chery had said in March that they would form an equally owned joint venture to make and sell Jaguar sedans and Land Rover sports-utility vehicles in China. They also plan to manufacture co-branded vehicles. Currently, JLR has a business unit in China that imports and sells the company's vehicles.

The China venture is part of the company's plans to cut import costs by expanding its manufacturing footprint in emerging markets. JLR already has a plant in the Indian city of Pune, where it assembles Land Rover's Freelander SUV.

The company is Tata Motors' biggest moneymaker, and the reason the Indian company has been able to offset a slowdown in demand in the country's automobile industry. Tata Motors, India's biggest auto maker by sales, bought JLR from Ford Motor Co. F -0.29% in 2008 for USD 2.3 billion.