STORY: Volkswagen shares slipped on Wednesday (July 10) after a profit warning.

The German auto giant said it saw a 3.8% drop in second-quarter sales.

China was a particularly difficult market as deliveries fell by almost a fifth.

Sales of combustion engine cars have fallen in the country, but still make up most of VW's line-up in China.

The carmaker has said it will raise its battery-powered offerings in coming years.

It will also prioritise profitability even as rival Chinese carmakers slash prices by up to a half.

A VW spokesperson told Reuters they "do not expect an easy year."

The company lowered its operating return on sales forecast down by between half and a full percentage point.

It further said its Audi brand was considering closing its Brussels site due to low demand for its higher-end electric cars.

Volkswagen shares were down over 1% in early trade, but slightly recovered later.