Toyota has decided to break away from its industrial traditions spanning decades by developing and producing an all-electric SUV under its luxury brand Lexus inside China, rather than in its home market of Japan. This car will be the first vehicle produced by Lexus in China in over two decades, with the official market launch scheduled for 2027.
The company confirmed that the new car will be manufactured at its wholly-owned production complex in the Jinshan district of Shanghai. This factory is the company's first to be built entirely from scratch outside Japan, with its foundation stone laid in June 2025, aimed at leveraging the operational speed characterizing the Chinese industrial environment to keep pace with local competitors such as BYD.
Modern Production Technologies and Gradual Operational Capacity
Toyota aims to adopt advanced manufacturing methods in the new facility, foremost among them being gigacasting technology to cast large parts of the car's body in a single mold, which helps reduce production costs and speed up operational operations. The factory's production capacity is scheduled to start at a rate of up to 1,000 units per month during 2027, before expanding gradually to reach tens of thousands of cars annually by 2028.
This step comes at a time when pressures on Toyota's sales in the Chinese market are escalating; its sales dropped by 18.9% during the first nine months of 2026 to reach 1.05 million vehicles, and it also recorded a decline of about 20% in monthly sales recently due to intense competition and falling demand for fuel-powered and hybrid cars in favor of all-electric vehicles.
Why Does This Shift Represent a Turning Point for Toyota?
Toyota's new vehicle development cycle typically takes between four to five years according to traditional work mechanisms in Japan. However, the fierce competition in the Chinese market has forced this cycle to be shortened to just two years. By adopting the "In China, For China" strategy, Toyota seeks to develop the innovation ecosystem locally and directly benefit from Chinese supply chains for batteries, digital technologies, and electric vehicle components.
Although Toyota continues to apply its multi-pathway strategy in global markets—which includes hybrid cars, conventional engines, and electric ones—the specificity of the Chinese market has forced the group to adapt quickly and rely heavily on the local technical ecosystem to maintain its market share in its third-largest market globally.