Toyota's sales in China are slumping as it faces brutal competition from local EV giants like BYD.The Japanese automaker plans to fight back by taking a page from Elon Musk's playbook.It said Wednesday it would build a fully owned EV factory in Shanghai, after Tesla did the same in 2019.Toyota is taking a page out of Elon Musk's playbook as it plots a comeback in China.The Japanese automaker announced on Wednesday that it would build a new EV and battery factory in Shanghai, as it seeks to turn around stuttering sales in the world's most competitive car market.Toyota will fully own the new factory, which it says will have the capacity to produce 100,000 electric vehicles a year for the Lexus brand from 2027.The facility will see it join Tesla as part of a select group of foreign automakers who run their own Chinese operation, along with Tesla's Shanghai gigafactory and a VW plant in eastern China.Foreign carmakers were previously required to enter into partnerships with local companies to build cars in China, though those rules were relaxed in 2018.The new factory marks a change in strategy for Toyota, which currently sells cars in China through joint ventures with local firms FAW and GAC.The world's largest automaker has struggled in China, with sales dropping nearly 7% in 2024 amid brutal competition from homegrown EV giants like BYD.Toyota's decision to prioritize hybrids over battery electric vehicles has seen the company avoid the slumping sales and financial difficulties that have hit some of its rivals.But it has also meant Toyota has struggled to compete with the wide range of low-cost electric vehicles on offer in China, with BYD selling EVs for as little as $10,000.The Japanese giant is trying to change that, in part by following Tesla's lead.Tesla opened its Shanghai gigafactory in 2019, after Elon Musk pushed for a relaxation in China's foreign ownership rules.Production at the factory scaled up rapidly, and by 2021, around half the company's global deliveries came from the Shanghai site.China has since become one of Tesla's most important markets, with Tesla selling around 657,000 electric cars in the country last year as it competed with local rivals in a brutal price war.Toyota's strategy shift in China comes as the company reported a 27% drop in quarterly profit in its latest earnings.Toyota's vehicle sales also dropped slightly to 10.8 million vehicles, enough to retain the title of world's largest automaker but raising concerns that the hybrid boom that has fuelled Toyota's recent growth may be slowing down.Despite this, Toyota raised its full-year profit forecast by 400 billion yen ($2.6 billion) to 4.7 trillion yen ($30.7 billion) as it also announced its new $14 billion battery factory in North Carolina was ready to begin production.Toyota did not respond to a request for comment, sent outside normal working hours.