Japanese automaker Toyota’s Lexus brand has begun construction on its first EV manufacturing plant outside of Japan, located in Shanghai’s Jinshan district. The facility marks the first Japanese complete vehicle project to land in Shanghai and represents the global debut of Toyota’s latest EV technology beyond its home country.

The plant is projected to be completed by August 2026 and commence production in 2027, with an initial annual capacity of approximately 100,000 vehicles. These EVs will not only cater to the Chinese market but also be exported to Japan and other international markets.

Toyota has also announced plans for over 95% localization of parts procurement for the Lexus new energy project, aiming to bolster the regional new energy vehicle industry and accelerate its own electrification and intelligent vehicle strategies.

🔗 Source: Yicai

🧠 Food for thought

1️⃣ Toyota’s China strategy evolution reflects broader industry localization trends

The new Lexus factory in Shanghai represents the culmination of Toyota’s decades-long approach to the Chinese market, which began with Crown exports in 1964 and gradually evolved through service stations and joint ventures 1.

Toyota’s previous China strategy focused on creating joint ventures with local partners like Tianjin Automobile Industry Group, establishing component manufacturing before full vehicle production 2.

The commitment to 95% local procurement for the new Lexus plant demonstrates a significant deepening of localization compared to Toyota’s earlier approach in China, which initially relied more heavily on Japanese-made components.

This pattern of increasing localization follows Toyota’s established playbook, seen previously when they began producing hybrid systems locally in 2015 after establishing specialized facilities for hybrid transaxles (2012) and batteries (2013) 3.

The rapid timeline from agreement signing in April to groundbreaking now (just two months) highlights the accelerated pace of automotive development in China compared to historical norms in the industry.

2️⃣ China’s transformation from market to supply chain powerhouse

The presence of 17 Chinese automotive suppliers in the global top 100 highlights China’s evolution from being primarily a consumer market to becoming a critical hub in the global automotive supply chain.

China’s battery production dominance is particularly striking, with the country controlling over 75% of global battery manufacturing capacity and significant refining capability for critical materials like lithium, cobalt, and graphite 4.

This supply chain strength creates a self-reinforcing ecosystem that benefits domestic production, as evidenced by the NEV industry clustering in regions like the Yangtze River Delta (where the new Lexus plant will be located) 4.

The Chinese government’s strategic investments have been crucial to this supply chain development, including a recent RMB 520 billion (US$72.3 billion) tax incentive package specifically targeting NEVs 4.

Recent Lexus developments