They sold 10.175 million cars in 2016 but were short by 10.31 million sales figures reported by Volkswagen last week. This year is particularly rewarding for Volkswagen after annual sales of 9.93 million cars in 2015.
The company announced this milestone amid VW's emission cheating scandal, which sparked a global criticism and multiple lawsuits. VW enjoyed bigger increase in China sales than Toyota thanks to a tax reduction. The vehicle maker's Europe sales rose 4 percent to 4.21 million units previous year.
U.S. carmaker giant General Motors (GM) is planned to announce its results next week, but it is likely to stay behind both Toyota and the German firms.
Sales plunged 34 percent in Brazil and slipped almost three percent in the U.S. while gaining four percent in Europe.
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Volkswagen (ETR:VOW3) of Germany has overtaken Toyota Motor of Tokyo, Japan to emerge as the highest selling carmaker in the world for 2016. Volkswagen recently agreed to pay over $20 billion in settlement and plead guilty to criminal charges in the United States over its admission that it manipulated its diesel cars with software to cheat emissions regulations. Booming China sales, where VW sells few diesels, helped offset that damage. In 2011, the Japanese auto maker slipped back due to the tsunami that hit Japan and the consequent damage and destruction it caused to production facilities, suppliers and of course, cars that were already ready to be dispatched. A Volkswagen spokesman said, according to the BBC News, that "2016 was a very challenging year for us".
"We made strides in resolving and overcoming the diesel crisis and. we managed to stabilise operating business in hard conditions", he said.
The annual figures come as the industry faces an uncertain outlook with Trump threatening punitive tariffs on imports into the USA in a bid to force them to manufacture and hire there.
Such quandaries Toyota faces imposes a larger problem for Japan, whose economy is largely supported by its exporters. Despite losing the top spot to the German company, Toyota Corporation remains the envy of the global auto industry for its strong profit margins and tremendously efficient production.