Volkswagen AG (VLKAY) shares led German stocks higher Thursday after it posted stronger-than-expected first quarter revenues, and confirmed its full-year profit outlook, even as it cautioned on sales margins and set aside more cash to cover costs linked to its emissions cheating scandal.

Volkswagen said first quarter sales came in at €60.012 billion, rising 3.24% from last year and topping the consensus forecast of €58.2 billion, while operating profits were marked in-line with forecasts at €3.9 billion. The group set aside a further €1 billion to cover legal costs associated with its emissions cheating scandal, which was first revealed in 2012 and continues to cast a pall over the world's second-largest carmaker.

Volkswagen also said it expects a narrower return on sales, which it sees at the lower end of the previously estimated range of between 6.5% and 7.5%, as passenger car volumes fall thanks to weakness in key markets such as China and Western Europe.

"The Volkswagen Group is once again off to a good start this year," said CFO Frank Witter. "The sales revenue performance and earnings growth in the first three months of the current fiscal year are encouraging. But we have to continue to pick up the pace when it comes to our transformation."

Volkswagen shares were marked 3.24% higher in early Frankfurt trading, pacing gains for the DAX performance index and changing hands at €160.06 each.

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The Stoxx 600 Automobiles and Parts index, the sector benchmark, was marked 0.4% lower at 530.42 points but has been held down over the past few months amid concern that the White House may opt to impose tariffs on European-made cars.

President Trump received a report from the Commerce Department in mid-February that assessed their risk to national security, and was given 90 days to review the report and make a decision on extra tariffs that could come in the next few weeks.

Earlier this year, CEO Herbert Diess said he would review the group's brand portfolio, which includes Bentley, Skoda, Porsche, Ducati and Lamborghini, with a view to shedding some non-core assets later this year.

He has also pledged to steer the iconic carmaker towards clean energy vehicle production as emissions standards and incentives drive changes in the global auto market, with an aim to product 22 million electric cars by 2028.

It also wants to accelerate its investments in China even after the biggest slump in annual sales in the world's biggest care market in three decades last year.