Toyota, the world's largest carmaker by sales, plans to build an electric vehicle factory in Shanghai for its premium Lexus brand to catch up with local EV brands in China, reported the Nikkei on Monday.

The report said Toyota aims to bring the factory online around 2027 and will operate it without a local partner. That would make it the first Japanese vehicle factory of its kind in China.

Lexus declined to comment when contacted by China Daily. The premium brand's vehicles sold in China are imported from Toyota's manufacturing facilities in Japan.

Toyota has joint ventures in China with local Chinese carmakers FAW and GAC to produce and market Toyota-branded vehicles.

The move comes as Honda and Nissan, Japan's number two and three automakers after Toyota, agreed on Monday to launch talks on a merger to help them strengthen their position on EVs.

Citing "dramatic changes in the environment surrounding both companies and the automotive industry", Honda and Nissan said they plan to list a holding company in August 2026.

The two carmakers have joint ventures in China as well.

Japanese carmakers have been slow to embrace pure electric vehicles, compared with Chinese and European car companies.

Statistics from the China Passenger Car Association show that around 60 percent of the world's new energy vehicles, including electric vehicles and plug-in hybrids, are made in China.