Japanese auto giant Toyota Motor has established a new energy subsidiary under its luxury vehicle brand Lexus in Shanghai with a registered capital of JPY107.1 billion (USD711.8 million), focusing on the research and development of auto parts and car sales.

Lexus Shanghai New Energy was established on Feb. 18, according to corporate data platform Qichacha.

On Feb. 5, Toyota announced it had reached a carbon-neutral agreement with the Shanghai government to set up a wholly-owned company to develop and produce Lexus electric vehicles and batteries in Jinshan district. The new firm is scheduled to start production at a plant with an initial annual capacity of around 100,000 cars in 2027.

The new factory will develop and manufacture Lexus EVs by leveraging the mature industrial chain foundation, logistics network, talent system, and market scale in Shanghai and the Yangtze River Delta region, Toyota noted.

The plant will create about 1,000 people in the start-up phase, Toyota said, adding that it will use innovative production technologies to achieve a local parts use rate of over 95 percent and deliver products to China, Japan, and other overseas markets.

Lexus entered the Chinese market in 1994 and established a local franchise network in 2005. Since then, it has been sold as an imported brand, making it the only mainstream luxury car brand that has not achieved localization.

Lexus sold more than 180,000 units in China last year. It was the only imported luxury auto brand to log a year-on-year growth.

The Chinese market will play a very important role in Lexus's electrification transformation, according to Tsuneji Sato, president of Toyota. The company plans for the brand to become fully electric by 2035.