The German automaker, with its nine car and truck 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.
Volkswagen, meanwhile, is benefiting from government stimulus plans that have boosted sales in China, Germany and Brazil, which together accounted for 44 percent of group sales last year, making it more likely that it beat Toyota or at least came close.
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 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.
Its 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 Toyota's global sales.
Volkswagen had projected a 10 percent decline in its global sales for 2009 back in January, but the sharp reversal in trends in Germany and China could alter that outcome.
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.
The automakers are expected to disclose their worldwide first-quarter vehicle sales over the next week.
The ranking could easily change in subsequent quarters.
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 in 2008.
Volkswagen, for its part, will have a full year of contribution from the remodeled Golf, a perennial best-seller, and the relaunch of its popular Polo compact car.
Volkswagen has also moved up in stock value ranking, grabbing the No.2 spot behind Toyota, whose market capitalization of $133 billion still dwarfs the German carmaker's $100 billion.
Market research company R.L. Polk Germany predicted this month that Volkswagen would overtake GM as the world's second-largest automaker as the U.S. giant suffers steep declines at home amid fears of bankruptcy.
(Editing by Ian Geoghegan)