Volkswagen expects continued weakness in China's auto market for the remainder of the year, saying it does not anticipate a recovery that would reverse losses already incurred.
The Chinese automotive market is under increasing pressure, the group said in Beijing.
The German carmaker expects the overall market for new vehicles to decline to under 21 million vehicles and said it would adjust its plans accordingly, without providing further details.
Volkswagen's comments came after the China Passenger Car Association (CPCA) reported a 19.5% decline in vehicle sales in the first five months of the year compared with the same period a year earlier.
The company cited changes to subsidy and tax policies, rising fuel prices and continued price competition as factors weighing on consumer confidence and overall demand.
Despite the challenging market environment, Volkswagen said sales of its battery-electric vehicles continued to grow steadily.
The company said strategic adjustments and a product offensive focused on electric and plug-in hybrid models had left it well positioned to navigate market headwinds.
Volkswagen is due to hold its annual general meeting on Thursday.
