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Any new vehicle shortages for Toyota would come in the most important part of the year for auto makers.

sarah dea/The Globe and Mail

Toyota Canada Inc. is slashing its sales forecast for the May through July period, signalling that the crisis caused by the earthquake in Japan will play havoc with consumers' vehicle buying choices through the crucial spring selling season.

The company's sales target for Toyota brand vehicles has been cut to 30,000 for the three months, down 33 per cent from sales of 44,749 during that period in 2010, several dealers said after participating in a webcast with company officials earlier this week.

In a separate memo to dealers, Toyota said the May sales target is 11,500 - compared with 16,461 in actual sales a year earlier - and warned that the supply of new vehicles is starting to drop.

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The looming shortage of new vehicles is the latest example of the long-lasting and far-reaching economic effects of the devastating March 11 earthquake and tsunami in Japan, which have disrupted auto production around the world.

Any shortage would come in the most important part of the year for auto makers. Canadians buy more vehicles in May than any other month, and June is typically the second or third-highest month for sales.

Sandy Di Felice, a spokeswoman for Toyota, would not discuss the numbers in its forecast and said Thursday the company has ordered spring inventory and has it in place.

"We have the availability to meet customer needs during our busiest retail period," Ms. Di Felice said. "We put out targets all the time. The dealers use those as a guide and work to exceed them."

Rising gas prices have boosted demand for hybrid vehicles, she said, and the company is still trying to assess availability.

"We are extremely perplexed," said one Toyota dealer who also owns franchises for several other auto makers. "It's as if they don't want to do any business in May."

Other dealers said they believe they have enough cars to satisfy May demand, but by the middle of June they expect shortages of Toyota's most popular vehicles, including the Corolla compact and RAV4 and Venza crossover utility vehicles.

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"May and the first half of June, I'm not worried," one dealer said. "I'm really worried about the second half of June and July and part of August."

Honda Canada Inc. has already warned that the compact Civic, the best-selling passenger car in Canada, will be in short supply this summer. Shortages of Japanese cars provide an opportunity for competitors to boost sales.

General Motors of Canada Ltd. broadened its second-quarter incentive program this week to include a $500 bonus for buyers trading in a non-GM vehicle.

"It's a great time to capitalize on gaining market share as things get more competitive," said one GM dealer, who insisted on anonymity.

The bonus is aimed at all non-GM buyers as well as first-time buyers, a GM Canada spokesman said.

Although Toyota has cut incentives on new vehicles, it told dealers in the memo that it will make several moves to help them financially "as our new vehicle inventories begin to diminish."

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Each dealer will have a fund that can be used to clinch deals with customers, provide incentives to sales people, or be used in advertising or as a bonus to loyal customers.

Dealers who have mortgages with the company's Canadian financial services arm will be allowed to suspend principal payments for 190 days; interest rates on money dealers borrow to buy new and used vehicles from Toyota will be reduced by 50 basis points; and Toyota will permit dealers to offer nine-month extensions to customers returning their leased vehicles.

Toyota plants in North America have been running three days a week since April 15 and will do so until June 3, except for the week of May 23, when its two Canadian plants will be shut, and the week of May 30, when U.S. plants will be closed.

The drop in output at North American plants operated by the Japan-based auto makers will limit economic growth during the second quarter, economists have warned.

Production is not expected to be fully restored in Japan until late in the year.

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