On June 27, 2025, the Lexus new energy vehicle manufacturing base officially started construction in Jinshan District, Shanghai. The project is wholly owned by Toyota, with a total investment of 14.6 billion yuan and a planned annual production capacity of 100,000 vehicles, which is a historic step for Lexus to "move from imported to domestically produced" in the Chinese market. In the face of the Chinese electric car market where strong players such as BYD, Tesla, and NIO have already seized the opportunity, what is the intention of Lexus? Will it be able to fight its way out of this fierce "red sea"?
1. From zero to one: Lexus's localized layout in China has landed for the first time
Lexus has long relied on all-import sales in China, and its exquisite manufacturing and reliable reputation have made it firmly occupy a place in the traditional fuel vehicle market. However, in the face of the wave of electrification and the rapid transformation of the Chinese market, this model is gradually showing signs of fatigue. On February 5, 2025, Toyota Motor officially announced that it will establish "Lexus (Shanghai) New Energy Co., Ltd." in Jinshan District, Shanghai, to carry out R&D and manufacturing of pure electric vehicles and batteries.
Subsequently, on April 22, the Shanghai Municipal Government signed a strategic cooperation agreement with Toyota, and the Jinshan District Government, Toyota China and Lexus also reached land and investment cooperation. The project covers an area of 1,127,800 square meters, with a land bid price of 1.353 billion yuan, and is targeted to be completed in August 2026 and mass production of vehicles in 2027.
This marks the first time that Lexus has landed localized vehicle manufacturing in China, and it is also an important node in Toyota's strategy in China to fully shift to electrification and intelligence.
2. The triple motivation behind the investment
1. Local manufacturing, optimized cost structure
Fully imported models are limited by factors such as tariffs, logistics, and exchange rate fluctuations, making it difficult to compete effectively with domestic models on the price side. Local production will save Lexus about 15% to 25% of the marginal cost, which will help lower the price barrier and expand the younger consumer group.
More importantly, by establishing a complete parts supply system in the Yangtze River Delta region, Lexus is expected to create a local closed loop of "supply chain + manufacturing + delivery" integration.
2. Take advantage of the Yangtze River Delta to promote technology localization
The Yangtze River Delta region is home to many battery companies (such as CATL's Shanghai factory), automotive-grade chip manufacturers (such as Weir and Horizon), autonomous driving algorithm companies (such as Momenta) and vehicle R&D resources. Lexus enters this region, not only by leveraging the policy support of local governments, but also by synergizing with the high-end local technology ecosystem.
The localized layout will help Lexus quickly iterate in key tracks such as intelligent driving systems, on-board chips, and battery thermal management.
3. Anchor China and meet its 2035 electrification target
The Toyota Group has set out to electrify 100% of Lexus' global sales by 2035. The Chinese market is not only the world's largest consumer of new energy vehicles, but also the market with the most mature policy environment, infrastructure and consumer acceptance. The launch of this project will be a key fulcrum for Lexus to fulfill its commitment to electrification.
Figure: 14.6 billion yuan smashed into Shanghai Jinshan, can Lexus outperform the Red Sea of Chinese trams? (The picture comes from the Internet)
3. Challenges: The real pressure of the Red Sea of Chinese trams
Despite its ambitious layout, Lexus does not have a first-mover advantage in the Chinese market, and its challenges go far beyond the surface:
1. Fierce brand competition landscape
The Chinese market has already entered the stage of "brand differentiation" from "electric substitution". BYD firmly controls the main market of low-end and mid-to-high-end, new forces such as Denza, Ideal, and Wenjie have risen rapidly with intelligence and ecosystem, and Tesla continues to maintain its voice in the price range of more than 300,000 yuan.
In contrast, the Lexus electric vehicle has no mass production experience and market awareness has not yet been established, so it is doubtful whether its models and product capabilities will be attractive enough.
2. The pace of technology iteration is fast, and the time for make-up classes is limited
At present, battery technology is transitioning from lithium iron phosphate to solid-state batteries, and the chip platform is upgrading from traditional ECUs to centralized domain control platforms, and consumers' demand for intelligent cockpits and high-end assisted driving is rising rapidly. How Lexus completes the restructuring of the platform architecture and localization adaptation in a short period of time has become the key to its "make-up lesson".
It is worth noting that Lexus's parent company, Toyota, has lagged behind in the field of electric vehicles due to its conservative "gasoline-electric hybrid strategy". Whether it can be "last mover first come" at the level of pure electric and intelligent driving will become the focus of market observation.
3. The user's mind has not been converted
Lexus has the labels of "quietness", "reliability" and "fine craftsmanship" in the field of traditional fuel vehicles. But there is little consumer awareness in the EV space. In contrast, Li and Xpeng have established a strong emotional connection with consumers through "scene-defined products".
In order to break through the encirclement, Lexus must rebuild its brand awareness, not only to reflect the unique value of "luxury electric" at the product level, but also to establish long-term relationships with users through after-sales, OTA services, and digital ecosystems.
4. Heightened policy uncertainty
Although China still strongly supports the development of the new energy vehicle industry, the industrial policy is gradually shifting from "inclusive subsidies" to "technology neutrality + energy consumption constraints". This means that if companies fail to meet key indicators such as energy efficiency, carbon footprint, and localization rate, they may face policy pressures such as entry barriers and operating costs.
As a wholly foreign-owned enterprise, Lexus needs to flexibly respond to a series of regulatory challenges such as land policy, tax policy, and catalog certification of the Ministry of Industry and Information Technology.
4. Industry-level benefits: three major promotions for China's new energy vehicle ecology
Although the success or failure of Lexus has yet to be tested by the market, its localization will still bring multi-level positive effects:
* Raise the technical threshold of the high-end market: Its quality standards and technical specifications for core components are expected to drive upstream and downstream enterprises to upgrade simultaneously, and indirectly accelerate the technological leap of China's own brands.
* Expanding confidence for international brands to invest in China: The project may attract more global high-end automakers to shift their manufacturing focus to China.
* Optimize the regional industrial structure: Jinshan District is speeding up the construction of the "Intelligent Connected Vehicle Industry Corridor", and the Lexus project will become its pillar leader.
5. Conclusion: Not just a factory, but a "strategic fill-in".
Lexus chose to land in Shanghai "one step late", not only behind the construction of production capacity, but also the "landing verification" of brand, technology and global strategy in the Chinese market. Whether it can win the red sea race of electric luxury cars depends on whether Lexus truly completes the triple integration of local manufacturing, local research and development, and local users' minds.
For China's new energy vehicle industry, the Lexus project is equally significant: it is not only a new sample of the deep localization of international luxury brands, but also a milestone in the two-way integration of high-end manufacturing in the Chinese market and global brands.
In the next two years, as the 14.6 billion yuan is gradually transformed into product strength and market performance, we may witness another "redefinition" of Lexus.
