Although overall VW deliveries to customers fell 11 percent to around 1.39 million vehicles, the Wolfsburg-based group dramatically increased its share of the global passenger car market by 130 basis points to 11.0 percent.
To gain market share during a crisis is certainly remarkable, JATO Dynamics analyst Frank Brautlecht said.
Toyota has given no forecast for retail sales, but its latest estimate for shipments for the 2009 first quarter is 1.23 million vehicles, down 47 percent from a year earlier.
Volkswagen has the luck of being strong in the markets that are currently growing, while Toyota is exposed to those that are collapsing, said Ferdinand Dudenhoeffer, head of the Center for Automotive Research in Gelsenkirchen, adding the quarter's results would be close.
Volkswagen -- with its nine brands including Audi
But a deepening recession and credit crisis have crippled demand in Toyota's top markets, with U.S. sales falling 38 percent and Japan sliding 24 percent in January-March.
Market researcher R.L. Polk forecast VW -- majority owned by Porsche
Volkswagen is benefiting from government stimulus plans for the car industry that have boosted demand in Germany, China and Brazil, its three biggest markets that together accounted for half of all group sales in the first quarter.
In Germany, deliveries of Volkswagen group brands rose 4.5 percent to about 251,500 vehicles during the quarter. More than 160,000 new orders were booked as owners collected generous subsidies to scrap old cars in exchange for purchasing new ones.
Toyota, which significantly outsold every other manufacturer in 2008, has seen sales fall every month of this year in China, its third-biggest market.
By contrast, VW has seized greater control of weak markets like Russia. Despite a 39 percent contraction in overall Russian demand, Volkswagen grew its volume by 14 percent, enshrining it as the fourth-largest manufacturer in the country.
Volkswagen is a big competitor for Toyota, said Koji Endo, auto analyst at Credit Suisse in Tokyo. Audi is strong, Volkswagen is strong, and they're making good use of their small cars.
VW's liquid preferred shares
In the first quarter of last year, the German group delivered 1.57 million vehicles, a third less than Toyota's 2.41 million, which included sales at minivehicle and truck units Daihatsu Motor Co <7262.T> and Hino Motors Ltd <7205.T>.
Toyota's first-quarter U.S. sales fell 36 percent, while sales in Japan for the core Toyota brand plummeted 31 percent. The two markets account for just under half of its global sales.
Toyota, which is expected to disclose its worldwide first-quarter vehicle sales next week, could see competition heat up sooner than it expects with an eventual showdown in the United States -- the world's biggest car market where Volkswagen is now little more than an also-ran.
Toyota is counting on a third-generation Prius hybrid car due for roll-out next month to jump-start sales as more countries offer consumers incentives to buy energy-efficient cars. It will launch 16 new models in Europe this year following a product drought last year.
Volkswagen will have in 2009 a full year of contribution from the sixth generation of its flagship Golf hatchback and the relaunch of its popular Polo subcompact.
VW has also moved up in stock value ranking, grabbing the No.2 spot behind Toyota, whose market capitalization of $133 billion still outstrips the German carmaker's $100 billion.
(Editing by Erica Billingham)