Toyota to break with tradition and build next Lexus EV in China

Toyota has confirmed it will build a new Lexus-badged EV at its new manufacturing site in Shanghai, which will then go on sale at home in Japan.

The move to build in China, then sell in Japan is a sharp break from Toyota’s traditional, largely home-grown strategy. Notoriously conservative in its approach to carmaking, Toyota tends to develop and then manufacture its cars in Japan, then tailor them for overseas buyers.

But given that China is the largest market for 60% of all EVs globally, around 100 times larger than that of Japan, Toyota is the latest in a fast-growing list of legacy manufacturers which have taken the move to set up shop in China.

The Volkswagen Group, BMW, Volvo, and Tesla have all shifted some of their manufacturing to China. This is partially to access China’s automotive ecosystem for advanced tech, batteries, and production methods, and its ultra-rapid vehicle development cycles.

Legacy carmakers usually take between four and five years to develop and manufacture an all-new vehicle. In China, thanks to advanced manufacturing techniques such as BYD’s fully vertical integration, plus the absence of a ‘heritage’ car scene stretching back over a century, Chinese manufacturers can develop an EV from the ground up in as little as two years.

The new Toyota plant broke ground in July 2025, and construction is expected to wrap up in 2027. Initial vehicle output is reported to be around 1,000 units per month next year, increasing to “tens of thousands” in 2028.

Toyota says that the still-unnamed SUV will enter production in autumn 2027, and will be built using megacasting production techniques to improve safety. By using a single piece of metal for components such as the floor pan, megacasting also cuts costs and speeds up vehicle production. Volvo and Tesla use gigacasting for their EX60 and Model Y, respectively. Toyota calls the production method ‘Lexus Speed’.

China is Toyota’s third-largest market behind the United States and Japan. It already builds several EVs in China for China, including its bZ3X SUV, which uses a BYD battery and is co-developed as a joint-venture vehicle with GAC.

The Toyota bZ7 is an all-electric, China-only saloon underpinned by tech borrowed from telecommunications giant Huawei and also co-developed by GAC. Local ADAS specialist Momenta developed its driver safety systems. The new Lexus, meanwhile, will be a stand-alone Toyota product.