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Toyota is to slash worldwide vehicle production by 40% in September because of the global microchip shortage.
The world's biggest carmaker had planned to make almost 900,000 cars next month, but has now reduced that to 540,000 vehicles.
Volkswagen, the world's second-biggest car producer, has warned it may also be forced to cut output further.
The Covid pandemic boosted demand for appliances that use chips, such as phones, TVs and games consoles.
On Thursday, German firm Volkswagen, which cut output earlier in the year, told Reuters: "We currently expect supply of chips in the third quarter to be very volatile and tight.
"We can't rule out further changes to production."
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Toyota's other rivals, including General Motors, Ford, Nissan, Daimler, BMW and Renault, have already scaled back production in the face of the global chip shortage.
Until now, Toyota had managed to avoid doing the same, with the exception of extending summer shutdowns by a week in France the Czech Republic and Turkey.
New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips – also called semiconductors – as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.
The decision to cut production now has been precipitated by the resurgence of coronavirus cases across Asia hitting supplies.
Toyota factories, including those in continental Europe, will be affected.
But a spokesman for Toyota UK at Burnaston, in Derbyshire, said: "As far a we know don't see any impact on UK production" as a result of the cuts announced in Japan on Thursday.
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A wide range of businesses from car makers to small appliance manufacturers have been hit by the chip shortage.
Issues started to emerge last year when Apple had to stagger the release of its iPhones, while the latest Xbox and PlayStation consoles failed to meet demand.
Since then, one technology company after another has warned of the effects.
And last month, the boss of chipmaker Intel, Pat Gelsinger, said the worst of the global chip crisis was yet to come.
Mr Gelsinger predicted the shortage would get worse in the "second half of this year" and it would be "a year or two" before supplies returned to normal.
The shortage prompted US President Joe Biden to sign an executive order to address the issue. He vowed to seek $37bn in funding for legislation to increase chip manufacturing in the US.
Shares in Toyota fell by 4.4% on Thursday, their biggest daily drop since December 2018.
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