Lexus is not building an EV factory in China

On July 23, multiple news outlets claimed that Lexus was going to start producing cars in China, with production due to commence in 2026. The story was believed to originate from the 36kr website. Although the original article no longer seems to be on the 36kr website, many articles quoting it are still available. The story is false, with the official statement coming from Lexus as one of “no domestic production plan for the time being.”

The plans originally reported regarded a wholly owned factory located in Shanghai that would produce the UX hybrid model and a new electric car. Autohome speculated that the electric car would be a production version of one of the two new concept cars, the LF-ZC and the LF-ZL, shown at this year’s Beijing Auto Show. A production version of one of these would unlikely be ready until 2026, which fits in with the timeline for the factory.

New reports show that the original story was not without foundation, but the announcement was premature. Furthermore, it seemed strange that Lexus would want to produce the hybrid UX300h in China. There is a very limited market in China for hybrids, as it is not a PHEV, and making such a move even stranger is that there is a fully electric version, the UX300e, which would be a better fit.

A person familiar with the matter told local reporters, “Of course, if Lexus builds a wholly-owned factory in China, it will produce pure electric models, not hybrid products.”

The whole story likely has its origins in a June 29 report stating that Toyota was seeking a similar treatment to Tesla for Lexus in China, including tax breaks, policy support, land grants, and conditions for direct operation without the need for a local joint venture partner and this report originated from media outside China.

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“Shanghai has indeed been in contact with Toyota, but there are still many uncertain factors whether Lexus’ plan to build a wholly-owned factory can be implemented,” said the same source familiar with the matter.

Unlike Lexus, both Nissan’s Infiniti and Honda’s Acura brands built joint ventures in China in 2013 and began local production. Lexus, on the other hand, has often said that once sales reached a certain figure, they would consider local production, only to keep increasing that figure over the years.

In 2019, Lexus sales in China, including Hong Kong, amounted to 202,000 cars, but last year, with rapidly increasing electrification, this had dropped to 181,400. Lexus aims to have 100% electrification by 2035.

Cui Dongshu, Secretary General of the China Passenger Car Association, has said that Lexus building a manufacturing plant in China for EVs will have definite advantages due to the competitiveness of the Chinese market.

Earlier reports about Lexus building a factory in Shanghai claimed that the company would use 95% locally sourced parts. Furthermore the factory, like that of Tesla, would be used both to meet local demand and to export.

Editor’s note:

This seems to be far from a matter of story over. We were surprised by earlier reports that Lexus would consider making the UX hybrid in China, and that rumor has now been quashed. However, it seems that Lexus may well be seriously investigating setting up an EV plant in Shanghai, China, but the details have yet to be finalized.

Sources: Finance Associated Press, Autohome,