TOYOTA Motor Corp, the world's second-largest auto maker, has reported a drop in quarterly sales for the first time in seven years as the financial crisis crippled worldwide vehicle demand.

Toyota sold about 2,236,000 vehicles worldwide in the three months ended September 30, down 4.3 percent from 2,336,000 a year earlier, according to an e-mail from the company obtained by Bloomberg News.

General Motors Corp, the world's largest car maker, will release its third-quarter sales figure next Wednesday.

Car demand in the United States plunged the most in 17 years last month, forcing Toyota to offer no-interest loans and join GM, Ford Motor Co, PSA Peugeot-Citroen and Honda Motor Co in cutting production. Sales declines in Europe and Japan overwhelmed growth in China.

'The hope that emerging markets would make up for a slump in major markets is collapsing,' said Koichi Ogawa, chief portfolio manager at Tokyo-based Daiwa SB Investments Ltd, which manages US$28 billion. 'The financial crisis is infecting the real economy.'

Toyota shares fell 6.4 percent to 3,200 yen (US$34.42) at the 3pm close on the Tokyo Stock Exchange yesterday. The Nikkei 225 Stock Average plunged 9.6 percent.

Toyota's sales figures include its Daihatsu Motor Co and Hino Motors Ltd units. In the first nine months of this year, Toyota sold 7,051,000 vehicles, 1,000 more than the same period a year earlier.

The car maker's lead over GM in sales was 278,000 vehicles in the first half of this year. Last year, GM trailed in the first quarter and narrowed the gap in the second before topping Toyota by 3,100 vehicles for the year.

'Toyota will probably beat GM across the finish line this year,' said Hirofumi Yokoi, an analyst at CSM Worldwide in Tokyo. Still, 'Toyota is in a tough situation and growth is going to be a challenge.'

Buyers, shunning the sport-utility vehicles, vans and pickups that make up most of GM's sales, are grappling with tight credit and job losses that may further erode demand.