Volkswagen must cut costs to remain competitive against Chinese brands increasingly targeting the German auto group’s home market, CEO Oliver Bloom said Friday after a mixed quarterly earnings report.

Volkswagen’s operating profit fell 9.5 percent to €3.5 billion ($3.98 billion) in the April to June period. With revenues of €82.4 billion, the group was able to keep its operating margin within the 4.0 percent to 5.5 percent target range for the full year, at 4.2 percent in the second quarter.

The group maintained that profit guidance on Friday, but no longer expects revenue growth to decline by 3 percent in 2026.

The world’s No. 2 carmaker tried to strike a balance between reassuring investors and making the case for restructuring as it grapples with a tariff crisis, weakness in China and the potential closure of some German plants.

“As we look to the future, we face more and more risks,” Bloom said, pointing to more than 150 competitors in China.