Volkswagen (VLKAY) stock fell Friday after it said that worldwide sales were hit last month by a steep fall in China demand amid tax increases and a dispute with Audi dealers.

VW delivered 813,700 vehicles worldwide in January, the firm said, down 4% from the same period last year. Deliveries in China, VW's largest market, fell 14% to 344,000 while Brazilian car deliveries were down 18%. Europe saw strong growth of 7%, to 312,900, VW said, while deliveries in North America rose 9% to 66,600.

Volkswagen stock fell by 2.6% in early trading in Frankfurt, to change hands at €139.8, more than double the 1.15% loss for the Stoxx Europe Autos & Parts index.

The Chinese government said in December that the 2017 sales tax for small cars, with engines of up to 1.6 litres, will rise from 5% to 7.5%. Higher taxes come at a time when Volkswagen is pressured on all fronts.

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Lately it has faced a rebellion among third party Audi dealers in China, who it depends on to secure sales in the world's second largest economy.

Audi dealers threatened to suspend sales back in January as opposition to VW's planned joint venture with SAIC Motor Corp mounted.

VW said in November that it would begin building Audi cars in partnership with SAIC, a state backed auto manufacturer, extending an existing partnership that has seen VW use SAIC to build Skoda and Volkswagen brand vehicles for sale in the region.

VW's existing Audi dealers have opposed the plan out of fears that it will lead to SAIC's dealership network then being able to sell Audi cars, which are the most popular luxury vehicle in China.

The German conglomerate is also exposed to the threat of a border tax in America after it piled $1 billion into Mexico based production facilities during the runup to the U.S. election. North America is one of VW's fastest growing markets.

Added to this, Volkswagen is still paying for the emissions rigging scandal, which as cost it more than $20 billion in settlements to date, and could cost it more if the European Commission is successful in its effort to push European governments into pursuing the auto manufacturer over the scandal.