Japanese legacy automaker Toyota mulls establishing a new electric vehicle factory in Shanghai as it seeks to benefit from a “Tesla-like” treatment in the world’s largest automotive market.
Negotiation details
Toyota is currently in talks with Shanghai government officials about its proposal to build a new electric vehicle factory in the same city where Tesla is producing its China-made models, Bloomberg reported, citing people familiar with the matter.
The Japanese automaker is reportedly seeking treatment similar to what the Shanghai government gave the Musk-led company, particularly regarding tax breaks, policy support, and land grants.
It also includes the distinctive ability to own local production plants in the world’s largest auto market, even without partnering with a local company.
Toyota plans to primarily use the proposed factory to produce electric vehicle models under its luxury Lexus brand in China.
Uncertainty
Shanghai officials are undoubtedly very welcoming to investments from major companies across the world. However, it may need central government approval before making a final decision.
Therefore, the discussions are far from the final phase of the negotiation process and could still change.
If approved, Toyota’s planned EV factory could potentially accelerate Lexus’ entry into the burgeoning Chinese market.
It could also disrupt the highly competitive market, further intensifying competition against Tesla.
Toyota’s footprint in China
Toyota remains the leading automaker globally. However, it continues to record sales decline in the Chinese market amid the shift to electric vehicles.
Toyota already has several joint ventures with Chinese players, including GAC Group and FAW Group.
GAC Toyota’s retail sales declined 14.8% year-on-year to 292,377 vehicles in January-May 2024, China Passenger Car Association’s (CPCA) data revealed. This figure placed GAC Toyota in seventh spot among the top 10 automakers in the Chinese market, holding a 3.6% share. Unfortunately, FAW Toyota did not enter the ranking in the said period.
With the proposed local electric vehicle factory, Toyota could potentially benefit from government incentives to boost the competitiveness of its products. It can also help accelerate its production, which can enable it to fulfill the growing demand for clean energy vehicles in China.
In separate news, GAC Toyota will partner with Momenta to develop an intelligent driving system using end-to-end technology. The innovation will first arrive through Toyota’s bZ3X model.
