Toyota to build next-gen Lexus EV in China first

Toyota Motor plans to begin production of a next-generation Lexus electric SUV at a new wholly owned plant in Shanghai in the fall of 2027, marking a rare departure from its long-standing practice of developing and manufacturing advanced models in Japan first, according to a report by Nikkei Asia published Friday.just-auto+2

A Strategic Shift Toward China

The vehicle will initially be produced at a rate of about 1,000 units per month, with annual output planned to scale to tens of thousands of units from 2028. The Shanghai plant, located in the city's Jinshan district, broke ground in June 2025 and makes Lexus the second foreign auto brand after Tesla ↘ 0.80% to operate a wholly owned vehicle factory in China.cnevpost+1

The new Lexus SUV will feature gigacasting technology, which consolidates multiple aluminum body components into a single large casting. The method can reduce body weight by up to 20% and improve driving range by several percentage points while also enhancing body rigidity and shortening manufacturing time.just-auto+2

China's EV Market Pulls Toyota East

The decision reflects the overwhelming scale of China's electric vehicle market. Battery electric vehicle sales in China reached 8.57 million units last year, capturing 60% of global volume — roughly three times Europe's total and more than 100 times Japan's, according to GlobalData. Chinese BEV sales are projected to reach 11.41 million units by 2030.just-auto+1

Toyota halted development of a next-generation electric coupe in Japan this spring and shifted its EV focus toward SUVs, which are in stronger demand among Chinese consumers. The pivot comes as the company faces mounting pressure from domestic rivals including BYD, which launched a large electric SUV in June.cnevpost+1

Declining Sales Add Urgency

Toyota's China sales fell 24.3% year-on-year to 114,747 vehicles in July, and are down 18.2% for the first seven months of 2026. China remains Toyota's third-largest market after the United States and Japan, but local brands have steadily eroded its position.cnevpost

At the same time, the company's global outlook remains strong. Toyota reported net income of ¥1.47 trillion for the April-June quarter, up 75.6% year-on-year, and raised its guidance for the fiscal year ending March 2027. The automaker plans to produce 10.5 million vehicles worldwide in 2027 as hybrid demand continues to rise.just-auto