VW reports profit rise but warns of 'challenges' ahead

The German carmaker Volkswagen reported a rise in its quarterly profit, but noted slowing demand in key markets.

Second quarter operating profit rose nearly 5% to 3.49bn euros (£2.47bn).

But it listed a raft of potential problems, including "fierce competition, interest rate and exchange rate volatility, and fluctuations in raw materials prices".

The results come one day after news VW had overtaken Toyota to become the world's biggest vehicle maker.

But VW noted that robust growth in the global economy lost momentum in the first half 2015 and it said it expected the same level of growth for this year as in 2014.

VW cited risks to global financial markets resulting from "the strained debt situation of many countries".

It expects the strongest growth to come from Asian emerging economies, with moderate rates of expansion from major industrialised nations.

The company's shares are down more than 2% in Frankfurt.