Toyota Motor Corp. (7203.TO) lost its position as the world's No. 1 auto seller to General Motors Corp. (GM) on a quarterly basis in April-June, though it outsold GM in the January-June half for the first time ever, highlighting the titans' fierce battle for the top spot in 2007.

Analysts have said Toyota will likely outsell GM for the full year, after the Japanese car maker topped the U.S. company on a quarterly basis for the first time in January-March. But the race may be closer than expected after GM showed an improvement in the second quarter while Toyota faces challenges in its home market.

Toyota said Friday it sold 2.36 million vehicles worldwide in the April-June quarter, up 7% from a year earlier, including sales at its Daihatsu Motor Co. ( 7262.TO) and Hino Motors Ltd. (7205.TO) subsidiaries.

That was just below the 2.41 million vehicles sold in the same period by GM, which said Thursday that worldwide sales rose 0.4% in the quarter, supported by strength in emerging markets such as Asia and Latin America despite weak sales in North America.

Toyota didn't disclose group sales by region for the quarter but said sales excluding those at the two subsidiaries grew by more than 10% in May and June in North America, and by 80%-90% in each of the three months in China. Sales in Europe also grew steadily, it said.

For the first six months of this year, the Japanese auto maker sold 4.71 million vehicles, up 8% on year, topping the 4.67 million that the U.S. auto giant sold in the same term.

That means that so far this year, Toyota's lead in sales over GM has narrowed to 40,000 vehicles in the first six months from 90,000 in January-March.

The maker of the Corolla and the gasoline-electric-hybrid Prius has been enjoying steady growth in the U.S. and other overseas markets as its fuel- efficient models and reputation for quality lure consumers amid persistent high prices at the pump.

But it has been stumbling in its home market, posting 9%-12% falls each month in the latest quarter due to a relative lack of new products amid overall weak domestic vehicle demand.

Adding to its woes in Japan, Toyota had to suspend domestic output Friday because it couldn't procure engine parts from a supplier that was forced to halt output after a major earthquake.

Toyota is embarking on an offensive by launching new products in Japan. How far Toyota will be able to restore its domestic sales with the series of new models will likely remain key in the battle for No.1, while GM will likely need to gain further momentum in emerging markets.

A takeover of the top position by the Japanese company would end GM's 76-year reign, marking a fresh competitive landscape for the global auto industry.