Volkswagen will pause production of one of its most important cars next week amidst growing concerns of a chip shortage that could cripple its outputs.

Chipmaker Nexperia has frozen supply in a fallout from the ongoing US-China trade dispute, causing major disruption for the German automotive giant.

The Dutch government - under pressure from the US Trump administration - seized control of Chinese-owned Nexperia last month, citing intellectual property concerns.

In response, China curbed exports of its finished products that are needed by European car makers.

Volkswagen said earlier this week that it had 'long planned' to pause production of the Golf hatchback - its longest-running model and one of its biggest-selling products - at the Wolfsburg factory from next week but initially denied any connection with chip supply chain concerns.

However, on Wednesday the car maker told workers at other plants it cannot rule out assembly line stoppages due to the 'dynamic situation'.

Yesterday, VW issued an internal letter to staff saying production had not yet been affected by chip shortages, but it could not 'rule out an impact on production in the short term' over supply chain issues.

The restriction on chip availability could also hit Toyota, Honda and Nissan, which also use Nexperia as a supplier.

Production of the Golf hatchback at the Wolfsburg factory (pictured) at VW's headquarters will be paused on Wednesday 29 October amidst growing concerns over chip supply shortages

German daily Bild leaked VW's internal memo, which stated: 'Production is currently unaffected. However, given the dynamic situation, short-term impacts on production cannot be ruled out.'

It also reports that staff at the Zwickau factory - which currently employs around 9,200 people - have also been told in a meeting that 'Kurzarbeit', a subsidised short-time working scheme to avoid mass lay-offs, could be put in place.

The announcement was met with boos from workers, eyewitnesses told the paper.

However, VW Saxony has refuted the claims.

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The Bild report, citing sources familiar with the plans, also said that production stoppages at the brand's main plant in Wolfsburg - which employs around 60,000 staff - are scheduled from Wednesday 29 October due to the problems.

This will impact Golf assembly line first, with others to follow.

Other cars affected are likely to be Tiguan, Touran and Tayron, all of which are also built at the VW plant.

The company has not yet indicated how long production could be halted.

Volkswagen is said to have no immediate alternative microchip supplier, which could also prompt production line stoppages at its other factories in Zwickau, Emden and Hanover if inventories do eventually run low.

Chipmaker Nexperia has frozen supply to Volkswagen in a fallout from the ongoing US-China trade dispute, causing major disruption for the German automotive giant

On Wednesday, Volkswagen told workers at other plants in Germany t hat it cannot rule out assembly line stoppages due to the 'dynamic situation'. Wolfsburg Golf assembly line pictured

On Wednesday, a VW spokesperson declined to comment on the 'speculation' about the stoppage, adding that the company was monitoring the situation carefully.

On 30 September, the Dutch government took control of the Netherlands-based company - which is a subsidiary of China's Wingtech - amidst pressure from the US.

Nexperia has since told VW that it can no longer guarantee the long-term delivery of microchips.

China's retaliation of banning exports could now create issues for the wider European motor industry with the company's microchips used across high volumes of new cars.

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Volkswagen to pause car production amid major chip supply concerns