Toyota partners with Shanghai for wholly owned Lexus EV factory Production set to begin in 2027

Toyota Motor Corporation has signed a landmark strategic cooperation agreement with the Shanghai Municipal Government on April 22, marking a major step in the Japanese automaker’s electric vehicle (EV) ambitions in China.

The agreement will see the establishment of a wholly-owned Lexus EV manufacturing plant in Shanghai’s Jinshan District, set to commence production in 2027, Caliber.Az reports citing foreign media.

This move represents a pivotal shift in Toyota's China strategy. It positions the company as the second foreign automaker after Tesla to build a wholly-owned manufacturing facility in China, underscoring the growing importance of the Chinese market for the global EV race. Furthermore, it is the first such venture by a Japanese carmaker in the country.

Under the terms of the deal, Toyota will invest a significant 14.6 billion yuan (approximately 2.02 billion USD) into the project, which includes an initial land acquisition of 1,692 mu (around 277 acres). The facility will serve as a hub for research and development, manufacturing, and sales, focusing on the production of Lexus-branded electric vehicles and advanced battery technologies.

One of the key aspects of this new venture is the substantial localization strategy. Reports suggest that over 95% of the components used in the Lexus EVs produced at this facility will be sourced domestically, a move designed to drive down production costs and potentially reduce vehicle prices by 15-20% compared to imported models. This localization effort reflects Toyota’s intent to become more competitive in China’s highly dynamic EV market, where it currently holds a modest share with less than 1% of its sales attributed to electric vehicles.

For Shanghai, this project further cements its status as a global hub for new energy vehicle production, following Tesla’s Shanghai Gigafactory. The new Lexus factory will not only bolster the city’s standing as a key player in the global EV landscape but will also help Toyota tap into China’s rapidly expanding electric vehicle market.

This announcement aligns with Toyota’s broader global strategy to expand its electric vehicle lineup to 15 models by 2027, with a production target of 1 million EVs annually. The company’s goal of selling 1 million pure electric cars worldwide by 2030 hinges heavily on success in the Chinese market, which is seen as “absolutely core” to its EV future.

As Toyota seeks to regain its competitive edge in the electric vehicle sector, the success of its wholly-owned Lexus EV factory in Shanghai will be crucial to its long-term strategy, especially as competition from both Chinese manufacturers and other international automakers intensifies.

By Vafa Guliyeva