Facing Price War and Intense Competition from Chinese Rivals, Toyota Plans to Build EV Factory in Shanghai

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Due to price wars and intense competition from Chinese rivals, Toyota is planning to build a wholly-owned electric vehicle (EV) factory in Shanghai. The company is reportedly seeking treatment similar to Tesla, including tax breaks, policy support, and land grants, as well as 100% ownership without the need for a local partner. The factory would produce Lexus-branded EVs.

Shanghai Welcomes Investment, but Final Approval Rests with Central Government

A source familiar with the matter stated that Shanghai is eager to attract large companies like Toyota to boost foreign investment. However, the project’s approval ultimately lies with the central government, adding an element of uncertainty. Toyota has not yet commented on the matter.

Lexus to Play a Leading Role in Toyota’s EV Strategy

Since taking over as Toyota’s president in April 2023, Koji Sato has emphasized the need to prioritize EVs. To deliver more appealing EVs to consumers, Toyota must streamline vehicle structures and embrace an EV-first approach, fundamentally transforming its operations. In this regard, Sato has reiterated the importance of Lexus playing a leading role in the company’s electrification strategy.

Toyota Reiterates Commitment to Diverse Powertrain Options

Despite the push for EVs, Toyota has maintained its commitment to offering a variety of powertrain options, including gasoline, pure electric, hydrogen fuel cell, hybrid, and synthetic fuel. The company aims to sell 1.5 million EVs by 2026 and 3.5 million by 2030.

Previous Reluctance to Produce Lexus in China Stemmed from Quality and Profit Concerns

Toyota’s previous reluctance to produce Lexus in China was twofold: concerns about potential quality issues and a desire to protect the brand’s high profit margins.

Lexus Production in China Considered Since 2011

Toyota first considered producing Lexus in China in 2011. With the lifting of foreign ownership restrictions, rumors of Lexus domestic production resurfaced in 2018. However, declining import tariffs and convenient transportation options led to opposing voices against the move.