Toyota Motor Corp. has revealed plans to establish a wholly-owned electric vehicle (EV) and battery manufacturing facility in Shanghai, China. In doing so, the Japanese car giant is marking a significant departure from its traditional joint venture approach in the country according to AFP.

The new plant is slated to commence full-scale production of Lexus-branded EVs by 2027. Initial annual capacity will be a reported 100,000 vehicles.

When fully operational this move will position Toyota alongside other EV giants Tesla and Volkswagen as one of the few foreign car makers operating fully owned EV plants in China.

Back home in Japan, Toyota is, however, facing an increasingly challenging business environment with Honda, Nissan and a number of other automakers looking to reassess their own marketing strategies in the years ahead as EVs become a more accepted part of the market.

Most recently this saw Mitsubishi agree to work with Honda and Nissan to this end.

In a press release put out by Honda in late December, 2024, the firm announced that “Nissan Motor Co., Ltd., Honda Motor Co., Ltd., and Mitsubishi Motors Corporation have signed a memorandum of understanding to explore the possibility of Mitsubishi Motors’ participation, involvement, and synergy sharing in relation to the business integration through the establishment of a joint holding company outlined in an MOU signed between Nissan and Honda.”

Honda continued: “Nissan, Honda, and Mitsubishi Motors have reached a basic agreement to proceed with discussions based on the framework established in the MOU signed by Nissan and Honda on August 1 (2024) regarding the commencement of a strategic partnership focused on intelligence and electrification.”

It is an announcement that is still sending shockwaves through Japan’s conservative auto industry sector with many Japanese looking at how, when and from which company to start planning future EV purchases.

The decision by Toyota to open a factory in China though underlines the firm’s own commitment to strengthening its presence in what is the world's largest automotive market, although China will be a tough nut to crack given the intensifying competition from domestic EV manufacturers such as BYD, Chery, and Geely.

Historically, foreign automakers operating in China were required to form joint ventures with local companies to produce vehicles in-country. However, regulatory changes in 2018 have since permitted full foreign ownership of EV manufacturing facilities.

To this end, Toyota's new Shanghai plant will be its first fully owned manufacturing venture in China, complementing its existing joint ventures with FAW Group and Guangzhou Automobile Group.

The initiative comes as Toyota reported a 27% decline in operating profit for the quarter ending December 2024 according to CNBC, attributed largely to increased competition and rising costs. Despite this, the company has still raised its full-year profit forecast to JPY4.7 trillion ($31bn), citing efforts to enhance product competitiveness and reduce supply chain expenses.

In addition to its investment in China, Toyota is also expanding its existing EV operations in the United States with the establishment of a $14bn battery production facility in North Carolina AP reports. The facility when complete is expected to create approximately 5,000 jobs and support its North American models starting in April 2024.