The German firm sold 10.3 million vehicles in 2016, putting it ahead of the 10.2m from Toyota. Volkswagen recorded a 3.85 sales rise despite ongoing legal claims in the USA over the dieselgate emissions scandal.
Volkswagen CEO Matthias Müller said: "The race for size is not an end in itself. The fact we delivered more than 10 million cars worldwide in 2016 gives us stability. Our present vehicles success is the basis for our intensified efforts with future technologies such as e-mobility, autonomous driving and digitalisation."
Felipe Munoz, Global Automotive Analyst for JATO Dynamics, said: "The emissions issue was an enormous challenge for VW Group. Despite, the reputational issues it brought about, the German car maker was in a strong position when the scandal hit as a result of its strong sales volumes. By leading two of the three largest car markets, Europe and China, VW Group has been able to weather the storm while simultaneously improving its product offering more quickly than its competitors."