NANJING - Construction of a joint venture project between China's auto giant Chery and Britain-owned luxury carmaker Jaguar Land Rover started Sunday in East China's Jiangsu province.

Foundation stone-laying ceremony was held at the economic and technology development area in the city of Changshu, according to the city's government.

The JV project, with a total investment of 17.5 billion yuan ($2.8 billion), will have an ultimate annual output of 250,000 units of passenger vehicles, said the government in a press release.

The first phase of the project, which costs 10.9 billion yuan, is expected begin producing vehicles in July 2014. Annual production capacity of the first phase will include 77,000 Land Rover SUVs, 23,000 Chery cars, and 30,000 unit of Jaguar cars by 2016.

New energy vehicles and cars with aluminum body will be produced in the JV, and its own brand will also be developed after its completion.

The JLR is also expected to establish a research and development center in the city, said the press release.

Chery was founded in 1997 and has since emerged as one of China's largest and most productive automotive manufacturers. In 2011, Chery recorded sales of 643,000 units, ranking the sixth among China's passenger vehicle manufacturers.

JLR, a wholly-owned subsidiary of Tata Motors, is the largest manufacturer of premium vehicles in Britain.

In 2005, sales in China accounted for one percent of combined Jaguar and Land Rover sales. The country is now JLR's third largest market and is still growing.