Lexus Confirms Local Production in China!

On February 5, Toyota officially announced that Lexus will establish a wholly-owned research and production base for pure electric vehicles (EVs) and power batteries in Jinshan District, Shanghai. The initial annual production capacity will be 100,000 units, with a workforce of 1,000 employees. Production is expected to begin in 2027. Nearly 20 years have passed since Lexus first considered local production in 2006, after its annual sales in China exceeded 30,000 units.

Following years of relaxed foreign ownership restrictions in the automotive industry, Lexus will become only the second wholly foreign-owned automaker in China after Tesla. It also marks the first time a Japanese car brand has broken away from the traditional joint venture model, opting instead to fully commit to China’s luxury new energy vehicle (NEV) market. Previously, Acura (GAC-Honda) and Infiniti (Dongfeng-Nissan) both failed in their attempts.

The combination of "pure electric vehicles" and "2027" signals that this is not just a routine localization effort. Rather, Toyota aims to leverage China's robust NEV supply chain to solidify its position as the world's leading automaker.

According to Toyota’s latest global sales data, Lexus sold 851,200 vehicles worldwide in 2024, a 3.3% year-on-year increase. Electrified vehicles accounted for 52% of total sales, both setting record highs. In China, Lexus sold 181,900 units, a slight 0.3% increase from the previous year, making it the brand’s second-largest market after North America. Lexus’ share of Toyota’s total sales in China has now risen to 10%.

As the global automotive industry undergoes a revolution driven by electrification and smart technologies, Toyota and Lexus are no exception. Lexus is actively working toward its goal of 100% electrification by 2035.

In response to rapid market growth and technological advancements, Lexus has chosen to establish a wholly-owned factory in China. By independently developing pure electric vehicles and their core power batteries, Lexus can better integrate China’s well-established manufacturing ecosystem and supply chain, enabling a significant leap forward in electric and intelligent vehicle technology.

Toyota has previously unveiled groundbreaking automotive production technologies, including integrated die-casting and self-propelled assembly lines. The company also plans to begin mass production of solid-state batteries by 2027. Meanwhile, the Lexus RX has already been testing Level 3 autonomous driving technology in China. The debut of locally produced Lexus EVs will showcase both lower manufacturing costs and cutting-edge intelligent technology.

Tesla’s localized production accelerated the full-scale electrification of China’s domestic brands. Similarly, Lexus’ decision to manufacture in China will further enhance the country’s global competitiveness in auto manufacturing, transforming it from a major consumer market into the world’s most important automotive export hub.

At a time when Toyota has fallen significantly behind its competitors in the EV transition, China’s automotive industry has become crucial to its success. We believe Lexus’ move is not just about increasing market share in China; it represents a strategic effort to use Shanghai as a launchpad to overtake rivals in the global luxury EV market—perhaps its only real chance to do so.

Lexus’ journey toward local production has been fraught with challenges. From debates over localization standards to prolonged negotiations with FAW Group and GAC Group, and even an attempt to establish production in India—none of these efforts have fully resolved its localization dilemma or achieved a breakthrough in market expansion.

With China now leading in NEV technology and global automotive trade dynamics shifting, Lexus' localization strategy has also evolved. After years of hesitation between FAW and GAC, Lexus has decided to abandon the traditional "North-South Toyota" joint venture structure and independently establish a plant in Shanghai. This is not just a rational decision in terms of profitability and production planning—it represents a strategic move to reshape the global automotive supply chain and international market landscape.

For years, joint ventures have been criticized by Chinese automakers as failed attempts to exchange market access for technology. With the rapid rise of domestic brands like BYD and Chery, the traditional joint venture model is facing an unprecedented crisis. In fact, new joint ventures may now hinder the deep development of China’s auto market. Chinese automakers are no longer just “Made in China” but are now leading in innovation, branding, and global influence.

The Lexus independent project in Shanghai, focused on pure electric vehicles and high-performance power batteries, will not only accelerate the brand’s transition to electrification and intelligent technology but also inject fresh momentum into global automotive competition and technological innovation.

For Toyota, which has long focused on hybrid vehicles, making a breakthrough in the pure EV market is critical. Now, it is entrusting this mission to Chinese manufacturing, Lexus, and solid-state batteries. By leveraging China’s expertise, Toyota aims to position Lexus as the new global benchmark for luxury electric vehicles.

We can expect Lexus’ new EVs to offer the same pricing as luxury fuel cars while featuring China’s cutting-edge technology. With solid-state batteries enabling a 1,200 km range on just a 10-minute charge, Lexus could pose a serious challenge to Audi, Mercedes-Benz, and BMW.

As for Chinese luxury EV brands like NIO, Li Auto, and AITO, they have already won the trust of Chinese consumers.Now, it’s time for China-made Lexus to step into the ring. Let the competition begin!