Toyota Establishes New EV and Battery Production Company in China
Toyota has announced that it will establish a wholly owned production company in Shanghai to increase its production of EVs and batteries for its Lexus brand.
The move to China is the car manufacturer’s first fully owned EV manufacturing initiative in China. In the past, it relied exclusively on joint ventures with local companies, including GAC Group and FAQ Group, due to the Chinese government’s stringent restrictions requiring all foreign manufacturers to partner with a Chinese company on the ground.
However, Toyota is taking advantage of China’s policy changes initiated in 2018, which allows foreign car manufacturers to open wholly owned car manufacturing operations in the country. The move will make Toyota only the third foreign car manufacturer to establish wholly owned manufacturing operations in China, after Volkswagen and Tesla.
Production is expected to begin in 2027, with an expected annual capacity of 100,000 units and 1,000 jobs during its startup phase. Alongside vehicle production, Toyota has already made plans to work with the Shanghai Municipal Government on its carbon neutrality plans, which are expected to be completed in 2060.
Toyota’s move is part of the car company’s wider strategy of improving its presence within the world’s single-largest auto market. However, it already faces considerable competition from Chinese car manufacturers, which already have a stranglehold on the Chinese market, including Chery, Geely, and BYD.
They also see an opportunity to take advantage of one of the world’s fastest-growing EV markers. According to FT.com, China’s EV market has already established the country as the global leader in production and adoption. The latest statistics reveal that 60% of the world’s new energy vehicles are made in China, with big investments in charging infrastructure, competitive domestic manufacturers, and strong government support seen as the most significant contributors to the country’s position.
With China’s commitment to achieving carbon neutrality by 2060, Toyota sees an opportunity to benefit from the country’s evolving market dynamics and challenge its domestic manufacturers as it capitalizes on new demand for luxury EVs.
Should Toyota’s gambit succeed, there’s the potential that it will reap the rewards of getting in on the ground floor and encourage other foreign car manufacturers to establish operations in the country.
