Europe's biggest car maker Volkswagen has surprised the stock markets by reporting a leap in profits for the first half of the year.

The group posted a 31% gain in net profit to €2.57 billion due to strong sales in emerging markets. 'This shows that we are on the right path,' said VW chairman Martin Winterkorn. Sales were up 3% to €56.5 billion.

The group stood by its 2008 growth targets for both sales and operating profit. In the second quarter, VW's net profit surged to €1.64 billion, up 355 on a year earlier, while sales gained 4.5% to €29.5 billion. Both figures beat analysts' forecasts.

Most of the company's brands are to launch new models this year, and a VW statement said the group expected deliveries to surpass records set in 2007.

'The Asia-Pacific, Central and Eastern Europe and South America regions will record the highest growth in demand for group vehicles," it said. VW sold more than a half million units in China for the first time.

Volkswagen owns the VW, Audi, Seat, Skoda, Lamborghini, Bugatti brands, as well as Volkswagen Commercial Vehicles. VW also now holds 68.8% of the voting rights in the Swedish heavy truck maker Scania.