Volkswagen sees higher competition later this year as supply chain bottlenecks ease and China’s electric car market heats up, the carmaker said on Thursday, adding that it put margins over volume even as it fights to maintain market share.

The company was emboldened to stick to its annual outlook of a return on sales of 7.5 per cent to 8.5 per cent and higher deliveries by a strong first quarter, boosted by higher revenues in Europe and North America.

In China, though, sales fell by 14.5 per cent and Chief Financial Officer Arno Antlitz acknowledged that the carmaker had work to do to catch up with domestic competitors on battery-electric vehicles.

“Competition will intensify with more chips and more availability,” Antlitz said on a media call after the results.

Asked how the carmaker would respond to the wave of electric vehicle (EV) price cuts, Antlitz said: “Our focus is on quality of the business, rather than on volume. This is specifically true for EVs... we don’t want to lose our margin parity target out of sight.”

Volkswagen aims to achieve the same margin from combustion engine cars as EVs, though the latter are still far more expensive to produce, in part because of high prices of raw materials.

BMW, which also reported results on Thursday, said rising EV sales were weighing on costs this quarter because of higher material prices and research and development costs.