Toyota is looking set to become the world's biggest carmaker this year, after outselling General Motors by nearly 300,000 units.

GM, which has held the top spot for 77 years, saw a 5% drop in sales to 2.41m units in the last three months against Toyota's 1.8% rise.

At the end of June, Toyota had sold 2.4m vehicles, 278,000 more than its American rival.

With Toyota only 3,100 units behind GM at the end of 2007, analysts are predicting the Japanese manufacturer could take top place by the end of 2008.

Spiralling fuel prices have hit GM's sales hard, particularly in the US where sales were down a fifth in the second quarter as buyers deserted larger vehicles in favour of more economical replacements.

Toyota also recently announced it would begin production of its popular Prius hybrid in north America in 2010, aimed at meeting the surge in demand.