The new agreement is intended to free up production resources and relieve pressure on JLR's UK factories, which are understood to be nearing full capacity.
Magna Steyr, which operates its own factory in Graz, Austria, already builds vehicles for other car manufacturers. In the past, Magna Steyr has produced cars including the Peugeot RCZ, the Mercedes-Benz E-Class and the Mini Countryman.
While Jaguar Land Rover hasn't revealed which vehicles will be produced at the Magna Steyr plant, possible candidates for Magna Steyr to build include the Land Rover Discovery Sport, the upcoming Range Rover Evoque Cabriolet and a smaller variant of the Jaguar F-Pace crossover.
JLR has already committed to bringing 12 new or refreshed vehicles to market over the course of 2015-16. At the same time the firm will invest £3.6 billion on new vehicle development and expansion.
Bringing some vehicle manufacturing to the Magna Steyr site will allow the firm more time to search for its own bespoke European factory. Autocar understands the new plant will build models based on the company’s new aluminium architecture, with the upcoming Defender replacement being the lead candidate for overseas production.
Although the move to build an east European plant might prove controversial, JLR’s three UK plants are already packed to capacity.
The Evoque and Discovery Sport – both based on JLR's steel D8 platform – are currently built in the northwest at Halewood, which is thought to be operating at maximum capacity.