Toyota Follows Tesla’s Lead with a Wholly-Owned Lexus EV Factory in Shanghai

Toyota, Japan’s largest automaker, has signed an agreement with the Shanghai Municipal Government to establish a wholly-owned company in Jinshan District, Shanghai. This new facility will focus on the research, development, and production of Lexus electric vehicles and batteries.

The partnership extends beyond manufacturing, covering logistics, the entire industry supply chain, hydrogen energy, autonomous driving, and battery recycling. Toyota and the Shanghai government aim to create a benchmark project for carbon neutrality.

Production is set to begin in 2027, with an initial annual capacity of approximately 100,000 vehicles—creating around 1,000 new jobs. This marks Toyota’s first wholly-owned factory in China, making Lexus the first Japanese brand to take this step, following in the footsteps of Tesla’s Shanghai Gigafactory.

Moving Beyond Joint Ventures: A Tesla-Inspired Strategy

Traditionally, foreign automakers had to enter the Chinese market through joint ventures with local companies. Toyota, for example, partnered with FAW Toyota and GAC Toyota to manufacture its vehicles in China.

However, after China relaxed foreign investment restrictions in 2018 and introduced aggressive new energy policies, Tesla became the first foreign automaker to build a wholly-owned factory in China. This move helped accelerate the country’s EV industry, inspiring Toyota to follow suit.

According to Japanese media reports, the plant will focus on EV production, with the first models expected to be the previously unveiled LF-ZC or the more premium LF-ZL, which will not only feature a new-generation modular EV platform, but is also expected to be equipped with advanced battery technology that will allow it to achieve a range of close to 1,000 kilometres.

Why Shanghai?

Toyota’s decision to build its plant in Shanghai aligns with a strategic vision for the Chinese market. China is not only the world’s largest EV market but also boasts a highly developed and efficient supply chain.

A wholly-owned factory will allow Toyota to lower production costs, improve supply chain efficiency, and enhance the competitiveness of Lexus EVs in China.

Lexus is expected to sell 180,000 vehicles in China in 2024, a 3% increase from 2023. This steady growth highlights the brand’s strong potential in the premium market, reinforcing Toyota’s decision to invest in local production.

Shanghai, as China’s economic hub, also provides access to top talent and supply chain resources, positioning Toyota for long-term success in the country’s rapidly growing EV industry.

Toyota’s Electrification Goals and Market Challenges

Toyota aims to sell one million Lexus EVs annually by 2030 and fully electrify its global lineup by 2035.

This new factory is a crucial step in accelerating localized production, reducing supply chain delays, and responding more quickly to market demand. It will also create high-value jobs in China while supporting the country’s push for foreign investment in new energy industries.

However, Toyota faces intense competition in China’s EV market. Domestic brands like BYD, Li Auto, and Geely have significant advantages in technology and market share, while Xiaomi is making a strong entry into the EV spac

LF-ZL: A Flagship Electric SUV More Luxurious Than the Toyota Century?

According to Japanese media, the first production model from the Shanghai plant will likely be a production version of the LF-ZL concept, expected to debut in 2026 and enter production in 2027.

Positioned as Lexus’ new flagship SUV, the LF-ZL is seen as the brand’s equivalent to the Toyota Century SUV, offering cutting-edge luxury and technology.

LF-ZL Key Features

🔹 Size & Exterior Design

• Estimated dimensions: 5,300 mm (L) × 2,020 mm (W) × 1,700 mm (H)

• Wheelbase: 3,350 mm

• Features Lexus’ new minimalist yet powerful design language.

• Sharp daytime running lights and streamlined headlamps extend from the front wheel arches, giving it a sleek and sporty look.

🔹 Interior & Comfort

• Expected to rival or surpass the luxury of the Toyota Century SUV.

• Rear seats feature adjustable leg support and premium fabric upholstery for maximum comfort.

• Incorporates advanced human-machine interaction technology, blending digital innovation with high-end craftsmanship.

🔹 Range & Powertrain

• Powered by next-generation high-energy-density prismatic batteries.

• Expected range: 1,000+ kilometers per charge.

• Uses one-piece die-cast technology, reducing costs and streamlining production.

• Features an AI-driven performance optimization system that learns driving habits and adjusts vehicle settings accordingly.

🔹 Technology & Safety

• 12.8-inch touchscreen with the latest multimedia, navigation, and over-the-air (OTA) updates.

• Equipped with Toyota’s latest driver assistance and safety features for enhanced security.

With an estimated length x width x height of 5,300 x 2,020 x 1,700 millimetres and a wheelbase of 3,350 millimetres, the LF-ZL offers an extremely spacious interior.

Also Read: Lexus sells 851,214 units in 2024, highest in the brand's 35-year history