Toyota plans to establish an electric vehicle (EV) factory in Shanghai for its luxury Lexus brand, according to media reports on Tuesday. The factory, slated to begin operations around 2027, will be the first of its kind in China operated by a Japanese automaker without a local partner, as reported by Japan's Nikkei Business Daily. While Toyota has not confirmed the plan, public broadcaster NHK suggests the move is part of Toyota’s strategy to strengthen its position in the increasingly competitive Chinese market.

The decision comes as China has emerged as the world's largest vehicle exporter, surpassing Japan last year, driven in part by its dominance in the EV sector. Japanese automakers, including Toyota, have faced challenges in China, particularly due to their focus on hybrid vehicles, which have been overshadowed by China's rapid growth in fully electric vehicles.

Toyota’s move to build an EV factory aligns with broader efforts in the automotive industry to pivot toward electric and autonomous vehicles. On Monday, Honda and Nissan, Japan’s second and third-largest automakers, also announced they would begin talks on a potential merger to enhance their EV and self-driving technology capabilities. Despite challenges in markets like China, Toyota's diversified approach, offering a mix of hybrid and electric vehicles, has proven successful in other regions, including the United States.