NAGOYA (Kyodo) -- Toyota Motor Corp. is preparing to build a new factory to manufacture electric vehicles in Shanghai, with operations expected to begin around 2027, people familiar with the plan said Monday.

The Japanese automaker plans to produce EV models of its luxury Lexus cars at the envisioned facility in eastern China, the people said, adding the project is subject to change due to potentially volatile demand for EVs.

Toyota has manufactured vehicles in China, such as the RAV4 sport utility vehicle and the bZ4X electric car, under joint ventures with China FAW Group Co. and Guangzhou Automobile Group Co.

Toyota's sales in the first half of this year in the neighboring Asian country declined 11 percent from a year earlier to 785,000 units, due to strong competition from local rivals such as the EV giant BYD Co.

But the Japanese automaker has no plans to revise the current strategy under which it regards China as an important market, the people said.