Toyota is in discussions with Shanghai authorities about the possibility of building a wholly owned factory to produce Lexus' EVs, according to Bloomberg.

Japanese auto giant Toyota is discussing with Shanghai authorities the possibility of building a wholly owned factory, Bloomberg said in a report today, citing people familiar with the matter.

Toyota is negotiating for treatment similar to what Tesla (NASDAQ: TSLA) received, including tax breaks, policy support, land grants, and the unusual ability to directly own and control factories in China without the need for a local joint-venture partner, people familiar with the matter said.

Tesla's Shanghai factory, which began construction on January 7, 2019, and became operational by the end of 2019, is the first wholly foreign-owned automotive manufacturing project in China.

Giga Shanghai began delivering Model 3 sedans in January 2020 and Model Y crossovers in January 2021 to local consumers.

Toyota will use the plant to produce electric vehicles (EVs) for its premium Lexus brand, people familiar with the matter said, according to Bloomberg.

Authorities in Shanghai are open to attracting more foreign investment from large companies but may need central government approval, one of the people familiar with the matter said, meaning talks are far from finalized and could change.

Toyota is the world's No. 1 automaker, but it is seeing a decline in share in China, as are other Japanese carmakers, as local carmakers rise rapidly.

Toyota has several joint ventures in China, but sales come mainly from its joint ventures with GAC Group and FAW Group.

In the January-May period of this year, GAC Toyota's retail sales were down 14.8 percent year-on-year to 292,377 vehicles, according to the China Passenger Car Association (CPCA).

This puts GAC-Toyota in seventh place among the top 10 selling car brands in China, with a 3.6 percent share. FAW Toyota failed to enter the ranking.

Toyota appears to be trying to change the situation.

Local media outlet Caijing reported on May 8 that Toyota's joint venture in China have plans to introduce plug-in hybrid electric vehicle (PHEV) models in the next two to three years, and that instead of Toyota's original Hybrid model, it's likely to adopt BYD's DM-i technology.

Earlier today, GAC Toyota announced at its Technology Day event that it will work with local startup Momenta to build an intelligent driving system using end-to-end technology, which will first be available on Toyota's bZ3X model.

Toyota to adopt local startup Momenta's driver assistance solution in China