Jaguar Land Rover will produce cars in China starting in 2014, following the agreement to form a £1.1bn joint venture with Chinese car maker Chery.
The company has recorded a 58% increase in Chinese sales in the second quarter of the year.
JLR and Chery have started the construction of a factory near Shanghai. The facilities will include a new research centre and a plant to manufacture engines.
China is JLR’s third largest market, and the world’s largest automotive market.
Once completed, the new plant will be used to produce existing JLR models as well as vehicles that have been specifically designed for the Chinese market.
In a statement, JLR and Chery said: “Together, we will now begin working in close collaboration on our partnership plans to harness the capabilities of our respective companies, to produce relevant, advanced models for Chinese consumers.”