Toyota has reclaimed the crown of world’s largest carmaker by sales five years after losing it to Volkswagen, with the Japanese company boosted by a sharp rebound from the coronavirus pandemic.

The group, which also includes its Daihatsu and Hino subsidiaries, said on Thursday that it sold 9.5m vehicles worldwide in 2020, just above the 9.3m sold by its German rival, whose 12 brands include Audi, Porsche and Seat.

Both carmakers have benefited from a strong recovery in sales in China, despite a tumultuous year of plant closures and supply chain disruptions during the pandemic. But Volkswagen has been hit harder by a fall in sales in Europe.

For Toyota, demand for its Lexus luxury brand helped boost sales in China 11 per cent in 2020 — the only market to report year-on-year growth.

While the Japanese group’s global sales were down 11.3 per cent from 2019, the fallout from the pandemic was also offset by strong demand for its RAV4 sport utility vehicle in the US, its biggest market. Subsidies also helped to boost plug-in hybrids in Europe.

In December, sales in the US jumped 20 per cent from a year earlier, while those in France and Germany soared 85 per cent and 89 per cent, respectively.

Toyota lost its status as the world’s most valuable carmaker to US electric vehicle group Tesla last year, but the company’s focus on hybrids has paid off as it prepares to roll out battery-powered cars over the next two years.

“The spread of EVs in Europe is probably faster than what Toyota had anticipated so the key is whether it can come out with advances in battery technology,” said Yoshihiro Okumura, general manager at Chibagin Asset Management. “The next two years will be critical for Toyota in how investors view its EV strategy.”

Toyota has partnered with Tesla supplier Panasonic to develop solid-state batteries, which are expected to boost driving range and cut charging times for EVs. The carmaker is expected to unveil the technology at the Tokyo Olympics this summer, according to people briefed on its plans.

Toyota said 23 per cent of its global sales were now electrified vehicles, most of which were hybrids. Its hybrid technology, which has been available in its Prius model for 20 years, is the reason Toyota has one of the lowest average CO2 emissions per car of any automaker in Europe despite not offering any fully electric vehicles.

Following the recovery in sales, investment bank Jefferies raised Toyota’s operating profit forecast by 25 per cent to ¥660bn ($6.3bn) for the October to December period.

Still, analysts say the outlook for Toyota remains uncertain as the car industry grapples with a global chip shortage that has forced automakers to idle plants and furlough workers.

For the first three months of the year, Nomura estimated that global automobile output may be about 20 per cent lower than companies had planned. However, it said Toyota was likely to be the least hard hit because it diversified its supply chain following the Tohoku earthquake and tsunami in 2011.