Saudi Arabia signed a letter of intent with India's Tata Group to manufacture 50,000 Land Rover vehicles a year in the kingdom, using locally produced aluminium and steel, the commerce and industry ministry said.

Azzam Yaser Shalabi, president of the National Industrial Clusters Development Program (NICDP) Saudi Arabia and Dr Ralf Speth, Jaguar Land Rover chief executive officer formally signed the Letter of Intent paving the way for an automotive partnership in Saudi Arabia.

The $4.5 billion riyals ($1.12 billion) investment may later be extended to other Jaguar Land Rover brands, said a press release distributed at the signing ceremony in the Saudi capital.

The factory will start up in 2017 in either the Jubail or Yanbu industrial cities. Saudi Arabia is seeking to develop local industry to diversify its economy away from oil exports.

Dr Ralf Speth, chief executive of Jaguar Land Rover, said: “We are committed to further international partnerships to meet record demand for our highly sought after vehicles. Saudi Arabia is an attractive potential development option, complementing our existing advanced facilities in Britain and recent manufacturing plans to expand in other countries including India and China.”

Pending agreement on development options in Saudi Arabia, Jaguar Land Rover would expect to announce further plans in 2013, a statement said.

“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.” added Dr Speth. “If we proceed, it will complement our existing expansion in the UK and elsewhere.”

India's Tata group owns Jaguar Land Rover, Tata Steel and Tetley Tea in Britain. Jaguar Land Rover is owned by Tata Motors, a unit of Tata Group. - Reuters and TradeArabia News Service