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A Toyota booth at the Auto Shanghai show, in Shanghai, China, on April 19, 2021.Aly Song/Reuters

Toyota Motor Corp TM-N on Wednesday cut its annual production target by a half a million more vehicles as a chip shortage and COVID-19 sick leave crimped output.

It will build 8.5 million vehicles in the year to March 31, down from a previously estimated 9 million, the world’s biggest car maker said, as it posted a 21 per cent fall in operating profit for the three months to Dec 31.

“We don’t expect the imbalance in chip supplies to resolve quickly and the course of coronavirus pandemic is unclear,” a Toyota official told reporters. “We think that uncertainty will continue into the next business year,” he added.

Like other big global car makers, Toyota, which expected to build 9.3 million vehicles across the world at the start of its business year, has been forced to cut output and as the COVID-19 pandemic wreaks havoc on the global supply chains. That has forced it to cut costs in a bid to squeeze out more profit per vehicle.

The effort to raise margins has been helped by robust demand in key markets such as China, the United States and Europe, allowing to raise prices and lower the incentives it pays to lure customers.

The company is also benefiting from a weaker yen that is bolstering the yen value of overseas earnings.

Toyota stuck with its full-year profit forecast of 2.8 trillion yen ($24.3-billion). That prediction is lower than a mean 3.04 trillion yen profit based on forecasts from 27 analysts, Refinitiv data shows.

It’s 784.4 billion yen third quarter operating profit was higher than an average forecast of 716.8 billion yen based on the estimates from nine analysts, Refinitiv data shows.

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