Toyota, the world's largest car manufacturer by sales, plans to establish an electric vehicle (EV) production facility in Shanghai dedicated to its premium Lexus brand, according to a news agency report dated 24th December.

The initiative is intended to enhance Toyota's competitiveness against local EV manufacturers in China. The factory is expected to commence operations around 2027 and will be managed solely by Toyota, without a local partner. If realised, it will be the first Japanese-owned vehicle production facility of its kind in China.

Lexus, when approached for comment, declined to provide any statements. Currently, all Lexus vehicles sold in China are imported from ToyotaÂ’s manufacturing plants in Japan.

Toyota already has joint ventures in China with local carmakers FAW and GAC for the production and marketing of Toyota-branded vehicles.

This development comes amidst significant activity within the Japanese automotive sector. On 23 December, Honda and Nissan, ranked as Japan's second and third largest automakers respectively, announced plans to initiate discussions on a potential merger. This merger aims to strengthen their position in the growing EV market.

Citing "dramatic changes in the environment surrounding both companies and the automotive industry," Honda and Nissan stated their intention to establish a holding company, which is expected to be listed by August 2026. Both companies also maintain joint ventures in China.

Japanese automakers have been relatively slow in adopting pure electric vehicles compared with their Chinese and European counterparts.

Data from the China Passenger Car Association indicates that approximately 60% of the world's new energy vehicles, including EVs and plug-in hybrids, are manufactured in China.