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Visitors look at Toyota's Formula One racing vehicle at its showroom in Tokyo on Wednesday. ((Kim Kyung-Hoon/Reuters))

Toyota is pulling out of Formula One racing, the world's largest automaker announced Wednesday, saying it needs to cut costs and focus on its core business.

"Based on the current economic environment, we realize we have no choice but to withdraw from Formula One," Toyota president Akio Toyoda said at a news conference in Tokyo. "This has been a very painful decision for the company."

Toyota follows Honda Motor Co. as the second major Japanese automaker to withdraw from the sport in last 11 months. Honda pulled out in December 2008 amid worsening economic conditions. Brawn GP, which took over the old Honda team, won the 2009 F1 championship.

Toyota officials called the withdrawal from F1 complete, making a return to the sport unlikely.

Toyota, the world's largest car manufacturer, is seeking to cut costs as it expects to post an operating loss for the six months ended Sept. 30. It is due to report earnings Thursday.

The company posted its worst ever loss in the financial year ended March.

Auto market slump

Ryoichi Saito, an auto analyst at Mizuho Investors Securities Co. Ltd., said Toyota's move underscored a severe slump in the global auto market.

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Toyota Motorsport chairman Tadashi Yamashina cries at a news conference at the company's headquarters in Tokyo on Wednesday as the company announces its withdrawal from Formula One racing. ((Issei Kato/Reuters))

"The withdrawal from F1 is part of Toyota's cost cutting efforts amid a global downturn," Saito said.

"The company can no longer stay in costly F1 while making massive losses. Toyota's decision means that the company wants to invest more in hybrid vehicles rather than F1," he said.

Like other Japanese exporters, Toyota is hurt by a strong yen. The U.S. dollar has recently hovered around 90 yen. Toyoda, grandson of the company's founder who became president this year, has vowed to avoid a third straight year of losses.

On Monday, Japanese tire manufacturer Bridgestone Corp. announced it would not renew its exclusive deal to supply tires for F1 when its contract expires in 2010.

That announcement came one day after the 2009 F1 season concluded with the Abu Dhabi GP.

In July, Toyota-owned Fuji International Speedway announced it would not host the Japanese F1 GP from 2010 and beyond amid the faltering global economy.

Fellow Japanese automakers Subaru and Suzuki pulled out of the World Rally Championship ahead of this season, citing concerns about the global economic crisis.

Toyota made its F1 debut in 2002 but never won a grand prix. The team's best result was in 2005 when Jarno Trulli finished second in Malaysia and Bahrain.

Toyoda said the team's poor results were not a factor in the decision to leave the sport.

"Our decision would not have changed even if we had a victory," Toyoda said. "The fact that we are unable to give our drivers a chance to compete is very sad."