Toyota Motor will become the first Japanese automaker and second overall after US electric vehicle giant Tesla to build its own self-operated factory in China.

Toyota has reached an agreement with the Shanghai municipal government to set up a new company in Jinshan district that will research, develop, and produce electric cars and batteries for its Lexus brand, the Aichi prefecture-based company announced today.

Under the guidance of the local government and relevant departments, Toyota’s new wholly-owned subsidiary will leverage the industrial chain, logistics network, talent pool, and market size of Shanghai and the Yangtze River Delta region to develop Lexus-branded pure EVs tailored for Chinese customers, the firm noted.

The subsidiary’s new plant is expected to commence operations in 2027, according to Toyota.

While Toyota did not provide any further details about the project, previous social media rumors speculated that more than 95 percent of the components used in the factory would be made in China and that the EVs produced there would not only be sold in the country but also exported to Japan and other overseas markets.