Toyota Picks Shanghai for Next-Generation Lexus BEV, Betting on Gigacasting and Local Supply Chains

Toyota is breaking with its traditional playbook. The automaker will build its next-generation battery-electric vehicle (BEV) in China before anywhere else, with production at a plant in Shanghai set to begin in autumn 2027 under the Lexus brand.

A Modest Start, A Fast Ramp

Output will begin at just 1,000 vehicles per month before scaling to tens of thousands annually by 2028. Launching under the Lexus badge rather than Toyota gives the program a smaller, higher-margin production run to prove out the approach before committing to volume.

Gigacasting at the Core

The manufacturing centerpiece is gigacasting, a technique that moulds multiple aluminium body sections into a single large piece. The process cuts the weight of those sections by up to 20%, delivering an estimated 4-5% boost to a typical BEV's driving range while making the body more rigid and simplifying assembly. For manufacturing engineers, the appeal is straightforward: fewer parts, fewer joints, less assembly complexity.

Earlier in 2026, Toyota halted development of an electric coupe in Japan, redirecting toward the SUV format Chinese consumers prefer.

The Market Math

"The scale of China's BEV market explains the shift."

China accounted for 8.57 million BEV sales in 2025, 60% of the global total — roughly triple Europe's volume. According to GlobalData, local BEV sales are forecast to reach 11.41 million by 2030.

The broader market is soft, but the BEV segment is not the problem. In July 2026, retail car sales in China fell 20.9% year-over-year to 1.46 million units, according to China Passenger Car Association data. The decline was driven almost entirely by internal combustion engine (ICE) vehicles, which collapsed 44%. Plug-in hybrids fell 21.1% while BEVs grew.

Part of a Wider Japanese Playbook

Toyota is hardly alone. Honda has renewed its GAC joint venture and already reverse-imports China-built Odyssey minivans to Japan; it will also import its next Insight BEV from China. Nissan is shipping China-built BEVs including the N7 sedan. Mazda exports its China-built 6e sedan and CX-6e SUV.

The economics underneath are consistent:

"Sourcing batteries and components in China saves an estimated 30-40% against manufacturing in Japan, Europe or North America."

Chinese modular BEV platforms also compress development cycles from the traditional four to five years down to 18-24 months. Nissan is separately targeting 26 months, while Volkswagen has partnered with Chinese automakers to release up to 50 models for the Chinese market by 2030.

The Strategic Verdict

Japanese brands' combined market share in China has fallen from roughly a quarter in 2020 to around 13% today. What started as individual responses to sliding sales has hardened into a shared template — one that stops at the US border, where tariffs exceeding 100% on Chinese-assembled BEVs make the model unworkable.

"Japanese automakers are ceding their limited in-house BEV expertise, instead contributing their badge and tuning on top of it."

Whether that trade — local expertise for badge and tuning — holds up as a long-term strategy remains an open question. For now, the Shanghai plant will be the industry's most closely watched test case.

(Reporting by Stewart Burnett)