Toyota Motor Corp. is set to invest $1.25 billion and create 1,750 jobs with a new electric-vehicle battery plant in rural North Carolina, according to a public incentives deal approved Monday.

State and local governments offered an incentive package of more than $435 million over 20 years if the project in Randolph County meets investment benchmarks. The new plant, called Toyota Battery Manufacturing, North Carolina, is slated to start production in 2025. The jobs would pay roughly $62,000 a year on average, according to...

Toyota Motor Corp. is set to invest $1.25 billion and create 1,750 jobs with a new electric-vehicle battery plant in rural North Carolina, according to a public incentives deal approved Monday.

State and local governments offered an incentive package of more than $435 million over 20 years if the project in Randolph County meets investment benchmarks. The new plant, called Toyota Battery Manufacturing, North Carolina, is slated to start production in 2025. The jobs would pay roughly $62,000 a year on average, according to the state.

The development would be a boon to North Carolina, which has been the rare Southern state without a major auto production or electric-vehicle battery facility. The state has lagged behind neighboring South Carolina.

Alabama, Georgia, Tennessee and Kentucky have become major players in a region of the U.S. that increasingly dominates auto production at the expense of traditional strongholds such as Detroit.

State and local economic-development groups in North Carolina have spent a decade grading land, moving utility lines and annexing acreage to prepare a shovel-ready 1,825-acre site 25 miles south of Greensboro in hopes of landing an auto company. North Carolina had repeatedly lost out to states with an auto-making footprint, most notably in 2018 when Toyota and Mazda Motor Corp. cited proximity to auto suppliers in picking Alabama for a $1.6 billion assembly plant.

Toyota has been an electric-vehicle skeptic, one of the few major auto makers without a fully electric vehicle in wide distribution in the U.S. Its North Carolina plans reflect the mounting pressure on global auto makers to develop and sell battery-powered cars. Toyota, the world’s largest car maker by vehicle sales, had long viewed hybrid gas-electric vehicles as preferable to pure electric cars because of the difficulty of making and charging batteries suitable for such vehicles.

Earlier this fall, Toyota said it would spend $9 billion to build battery factories as it ramps up to sell two million electric vehicles annually by the end of the decade. Toyota, like Ford Motor Co. and other rivals, is opting to build its batteries in-house, a bet on the merits of controlling its own supply rather than relying on an outside supplier.

Analysts say energy costs are a major consideration for battery facilities, because they use up to five times as much energy as a typical auto plant. Randolph County is in a former textile region in the center of the state known for its access to plentiful water and cheap energy. According to local economic development managers, utility rates are up to 30% less than the U.S. national average.

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Write to Valerie Bauerlein at valerie.bauerlein@wsj.com