Toyota Motor Corp will launch a wholly owned company in Shanghai, marking another key milestone in the development of China's auto industry as the Japanese carmaker becomes the latest foreign motor vehicle producer to make such a move, following Tesla. Toyota will sign a comprehensive partnership agreement with the Shanghai Municipal Government regarding carbon neutrality, and it has decided to establish a new wholly owned company in Jinshan district in Shanghai to develop and produce battery electric vehicles (BEV) and batteries. The newly formed company will develop a new BEV under the Lexus brand, with production scheduled to begin from 2027 onwards. The initial production capacity will be about 100,000 units per year, and approximately 1,000 new jobs are planned in the start-up phase. The company highlighted potential cooperation in fields such as hydrogen energy, automated driving technology, and battery recycling and reuse, according to a press release.
Toyota's decision fully demonstrated China's attractiveness to foreign investment, and Shanghai welcomes global investors, including Japanese companies, to invest in Shanghai, the Shanghai Municipal Commission of Commerce said in a statement. The Commission said that it will continue to deepen the implementation of corresponding policies to expand opening-up, and create a first-class business environment that is market-oriented, law-based and internationalized, while helping foreign firms solve practical problems and providing more high-quality, efficient and targeted services.
Toyota is just the latest example of foreign carmakers stepping up investment in Shanghai. Tesla, which already operates a Gigafactory in Shanghai, is reportedly set to commission another plant in the city. The construction of Tesla's Shanghai Megapack energy storage plant was completed at the end of 2024 after just seven months, and the company is planning to launch a commissioning ceremony in the factory on February 11. The factory's production capacity is expected to increase in the first quarter of 2025.
Shanghai has the major advantages of an open business environment, a complete supply chain, and convenient logistics as an important port, Wu Shuocheng, a veteran automobile industry analyst, told the Global Times. When it comes to the country's overall strengths for attracting foreign vehicle firms, Wu highlighted China's vast market, leading technological advancements in the industry and supply chains, as well as relatively affordable labor costs and skilled talent as the main driving factors. A total of 59,080 new foreign-invested firms were established across China in 2024, an increase of 9.9% year-on-year, the Ministry of Commerce said in January.
The South China Morning Post adds that the Toyota plant will be the second fully owned car venture by an overseas company on the mainland, following Tesla’s Gigafactory in Shanghai’s Lingang free-trade zone, which launched production in late 2020. A total of 26.8 million cars were produced in China last year, an increase of 5% from 2023, according to the China Passenger Car Association (CPCA). Factories in Shanghai churned out 1.81 million petroleum-powered cars and EVs in 2024, a decrease of 16.2% year-on-year. The city’s car output last year was 38% less than Shenzhen’s 2.93 million units, which ranked as China’s largest car production hub for the first time. Shanghai also trailed Chongqing and Guangzhou last year. Shanghai, which is also home to ventures by General Motors and Volkswagen (VW), was the country’s largest car manufacturing center until 2021, when production reached 2.83 million, accounting for 10.7% of the national output. In 2024, carmakers in Shanghai built 1.2 million pure electric and plug-in hybrid vehicles, a decline of 4.8% year-on-year.
