Europe's biggest car maker, Volkswagen (VW) expects to break sales records this year, driven by growth in less developed markets in Asia, Central and Eastern Europe and South America.

Despite giving warning of lower growth for the automotive industry, VW delivered a bullish assessment of its prospects today, surprising the market with a stronger-than-expected 35 per cent lift in second-quarter net profit.

VW shares rose as much as 4.5 per cent in German trading. The European automotive sector was stronger after fellow car makers Peugeot Citroen and Fiat also defied gloomy forecasts with strong results.

VW's second-quarter net profit increased 35 per cent to €1.643 billion (£1.3 billion), while analysts had predicted net profit would grow 11 per cent. Operating profit in the period was €2.123 billion, up 22 per cent, exceeding a consensus forecast of €1.836 billion. Pre-tax profit rose from €1.944 billion to €2.417 billion.

Hans Dieter Poetsch, chief financial officer of VW, said the result was underpinned by the success of new car models, which include the Golf variant Tiguan and a coupe version of the Passat sold in the US. A new model of the Golf is due in European showrooms in October.

First-half sales totalled €56.5 billion against €54.852 billion in the same period in 2007. VW, which is the target of a takeover by fellow German auto maker Porsche, sold 1.89 million VW passenger cars in the six months to June 1, up slightly from 1.82 million in the same period last year.

The Audi subsidiary sold 656,000 cars, up from 623,000, Skoda sold 353,000, up from 316,000 while Seat sales rose from 211,000 to 217,000. Luxury brand Bentley remained steady at 5,000 cars. In China, vehicle sales rose from 445,000 to 545,000 in the first six months.

Last year was the best in the group’s history when it made 6.2 million vehicles and had record earnings of €6.5 billion.

Martin Winterkorn, the chief executive, said general market conditions around the world had become more difficult but he remained confident that 2008 sales would top those of last year.

"South America, Russia, India and China will remain the growth drivers, although growth in south America will slow somewhat. A decline in the number of new registrations is forecast for western Europe and the US," VW said.

"Growth in less developed markets would support flattish sales in western Europe and the US where new car registrations are expected to dip as consumer confidence remains low.

"Almost all group brands will launch attractive new models in 2008. We are thus expanding the group's product portfolio and moving into additional market segments. We therefore expect Volkswagen Group's deliveries to customers in 2008 to break the previous year's record."

VW paid $4.3 billion (£2.2 billion) in March for a majority share in Swedish lorry and bus maker Scania. Mr Winterkorn said the acquisition would make a slightly positive contribution to earnings in the second half. Meanwhile, VW is itself the target of a takeover by Porsche, the sports car company that owns 31 per cent of VW.

Today's figures showed VW passenger cars division's first-half operating profit rose 32 per cent to €1.3 billion, with unfavourable exchange rates burdening earnings although these were offset through higher sales volume and lower fixed costs.

Audi increased its profits despite flat revenues while the unfavourable exchange rate of the Czech crown against the euro eroded Skoda’s earnings, with operating profit growth only 7 per cent, even though revenues gained 9 per to €4.4 billion. Improved cost structures at Seat helped the brand swing to an operating profit of €2 million, which compares with a €7 million loss.

Operating profit at the commercial vehicles unit increased €94 million to 215 million, driven by stronger sales, productivity improvements and cost optimisation.

VW plans to introduce 12 models over the next three years, including a sedan developed specifically for the US, to boost global sales from 6.19 million in 2007 to 8 million vehicles. VW is seeking to catch up with Toyota, the world's second biggest automaker, in sales and profitability.

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