Toyota Motor Corporation plans to build a new plant in China dedicated to the production of electric vehicles (EVs) under its premium Lexus brand, according to unconfirmed reports in Japan citing sources close to the company.

The world’s largest vehicle manufacturer is understood to be planning to build a new wholly-owned assembly plant in Shanghai, with commercial operations scheduled to begin in 2027. The facility is expected to be the first Japanese vehicle assembly plant in China to be operated without a local partner, and the second wholly-owned foreign vehicle plant after Tesla’s Shanghai Gigafactory.

Toyota currently produces Toyota-branded vehicles in China under joint ventures with two main local partners, FAW Group and GAC Group, both of which are state-owned. Lexus-branded models are currently still imported from Japan.

Toyota’s latest data shows that the group’s sales in China declined by 8% to 1.589 million vehicles in the first eleven months of 2024, after deliveries dropped by less than 2% to 1.908 million units in the whole of 2023. A new dedicated EV plant would help Toyota compete with the fast-rising competition from local automakers - amid an escalating price war in the EV segment.

Overall sales of new energy vehicles in China, comprising mainly battery and plug-in hybrid electric vehicles, are estimated to have exceeded 45% of total vehicle sales in the first eleven months of 2024, with their share of sales expected to continue to rise sharply in the second half of the decade.