Volkswagen, Europe's largest carmaker, has issued a profit warning amid declining domestic and North American sales, and a stronger euro.
Carmakers are finding it tough to boost sales after a growth slowdown
The company now expects profit before one-off items to be 1.9bn euros (£1.3bn; $2.3bn) this year, compared with an earlier forecast of 2.5bn euros.
Profit in the first half of 2004 slid 20% to 979m euros on sales of 45.9bn.
However, Volkswagen shares rose on the news as many analysts had expected the earnings figures to be far worse.
Harald Hendrikse, an analyst at Credit Suisse First Boston, said that the results were "substantially better relative to expectations, but expectations were super low".
He added that: "Volkswagen still has major problems".
As well as increasing pressure at home and in the US, the company reported its first ever decline in deliveries to China.
Sales in its most important foreign market dropped by 4.2%.
The company said that it expects there "will be no let-up in competitive pressure in key car markets, such as the USA, Europe and China".
There were bright spots, however, and the company said that it increased total deliveries to customers by 1.7% in the first half.
It also expects a cost cutting programme to deliver more benefits in coming months and produce total savings of 1bn euros in 2004.
Volkswagen shares added 1.8% by midday in Frankfurt.