NEW DELHI--Jaguar Land Rover PLC, a unit of Tata Motors Ltd., 500570.BY +0.02% is considering building a factory in Saudi Arabia to tap the potential growth market for luxury vehicles, and to also get access to aluminum--a key raw material for vehicle manufacturing.
The U.K.-based company said Tuesday that it has signed a letter of intent with Saudi Arabia's National Industrial Clusters Development Program to conduct a joint feasibility study "to determine the viability of setting up an automotive facility."
It added that it expects to complete the study in 2013, and then announce its plans for Saudi Arabia.
"This is an exciting project that could enable Jaguar Land Rover to establish a joint venture partnership in a part of the world where luxury-vehicle sales are expected to rise," said Ralf Speth, chief executive of Jaguar Land Rover. "If we proceed, it will complement our existing expansion in the U.K. and elsewhere."
Jaguar Land Rover, which contributes the bulk of Mumbai-based Tata Motors' profit, is setting up assembly plants outside the U.K. to cut costs and to scale up production to meet growing demand worldwide.
Like many other auto makers worldwide, Tata Motors is counting on China and India to drive growth in sales of its Jaguar, Range Rover and Land Rover brands because slowing economies and sluggish demand have hurt operations in more saturated markets such as western Europe.
The company already has a plant in western India where it assembles Land Rover's Freelander sport-utility vehicle. It is also building a manufacturing plant in China with Chery Automobile Co.
Jaguar Land Rover said that although talks with the Saudi Arabian government are at an exploratory stage, it has identified manufacturing of auto parts from aluminum as an opportunity in the country.
Ras Al Khair--the world's largest integrated aluminum complex, run by Saudi Arabian Mining Co. and Alcoa AA +1.28% of the U.S.--is set to start production in 2014.
Jaguar Land Rover has used aluminum extensively in its Jaguar XJ model and the new Range Rover SUV--which features an all-aluminum monocoque body structure.
"Issues such as level of investment, potential capacity and job creation have not yet been discussed in detail between the parties," Jaguar Land Rover said.
Sales of Jaguar Land Rover vehicles have risen sharply in emerging markets, which helped the company post 32% growth in global retail sales to 324,184 vehicles during January to November 2012.
Sales in the Middle East and North Africa increased more than 9% to 11,418 vehicles in the same period.
Tata Motors, India's biggest auto maker by sales, bought Jaguar Land Rover from Ford Motor Co. F +0.17% in 2008 for $2.3 billion. Jaguar Land Rover Looking at Building Saudi Arabia Factory - WSJ.com