Toyota Motor Corp. has announced plans to build a wholly-owned electric vehicle (EV) and battery manufacturing facility in Shanghai, marking a major shift from its usual joint venture model in China. This new plant is set to begin full-scale production of Lexus-branded EVs by 2027, with an initial production capacity of 100,000 vehicles per year.
Once fully operational, Toyota's Shanghai plant will position the company alongside global EV leaders like Tesla and Volkswagen, who are also operating fully owned plants in China. This decision highlights Toyota's growing commitment to strengthening its presence in the world’s largest automotive market. However, the company faces fierce competition from domestic Chinese EV manufacturers such as BYD, Chery, and Geely, which are all rapidly expanding in the EV sector.
Historically, foreign automakers in China were required to partner with local companies to manufacture vehicles. However, regulatory changes in 2018 allowed for full foreign ownership of EV manufacturing facilities, which Toyota is now taking advantage of with this new plant. This facility will be Toyota's first fully owned manufacturing site in China, in addition to its existing joint ventures with FAW Group and Guangzhou Automobile Group.
The move to establish a fully owned EV plant comes as Toyota is grappling with a tough business environment at home in Japan. The Japanese auto industry is undergoing significant shifts, with companies like Honda, Nissan, and Mitsubishi reassessing their strategies in response to the growing demand for EVs. In late 2024, Mitsubishi announced its collaboration with Honda and Nissan on a new strategic partnership focused on electrification, highlighting the increasing importance of electric vehicles in the global market.
Despite facing challenges, Toyota has continued to focus on enhancing its product competitiveness. In December 2024, the company reported a 27% decline in operating profit, partly due to rising competition and costs. However, Toyota has raised its full-year profit forecast to ¥4.7 trillion ($31 billion) as it works to reduce supply chain expenses and boost its competitiveness in the EV market.
In addition to its Chinese venture, Toyota is expanding its EV operations in the United States with a $14 billion battery production facility in North Carolina, which is set to create around 5,000 jobs and support its North American EV models by April 2024.
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