A flat tire.

Volkswagen AG (VLKAY) shares fell to the bottom of the market in Germany Wednesday, dragging European rivals lower, after the world's second-largest carmaker warned the "growing protectionism" could make it more difficult to meet near-term financial targets even after posting much stronger-than-expected second quarter earnings.

Volkswagen said underlying operating profit for the three months ending in June rose 23% from the same period last year to €5.58 billion ($6.5 billion) as overall group revenues grew 3.4% to €61.15 billion, a figure which fell modestly shy of Street forecasts.  Adding in the costs linked to Volkswagen's emissions-cheating scandal , however, reduced earnings by €1.6 billion and has cost the company €27.4 billion since it emerged nearly four years ago. Furthermore, despite maintain the company's full-year earnings guidance, Volkswagen warned the rising trade tensions, particularly in the auto sector, and costs associated with global anti-pollution tests would make achieving certain financial targets more difficult.

"The Volkswagen Group performed successfully in the first half of the year, with very solid growth in sales revenue and earnings. We also delivered more vehicles than ever before," said CEO Herbert Diess. "However, we cannot rest on our laurels because great challenges lie ahead of us in the coming quarters - especially regarding the transition to the new WLTP test procedure. Growing protectionism also poses major challenges for the globally integrated automotive industry."

Volkswagen's preference shares were marked 1.42% lower by mid-morning in Frankfurt and changing hands at €150.12 each, a move that extends the stock's year-to-date decline to around 9.5% and values the Wolfsburg, Germany-based carmaker at just over €74 billion.

Overall unit sales for the group rose 7.1% in the first six months of the year, the company said, to 5.5 million vehicles, even as the new Worldwide Harmonized Light Duty Vehicles Test Procedure (WLTP) delayed some of its production. Volkswagen Passenger Cars brand revenues rose 7.7% to €42.7 billion, while first half sales for its luxury Audi division -- which includes Lamborghini and Ducati -- hit €31.2 billion.

Volkswagen's reference to protectionism, however, was enough to spook investors worried that the current lull in U.S.-European trade tensions, which eased last week following a meeting between President Donald Trump and European Commission President Jean-Claude Juncker, could quickly resurface.

Domestic rival Daimler AG (DMLRY)  , for example, issued a surprise profit warning in late June, and said trade tensions and the ongoing diesel emissions scandal would mean fewer-than-expected Mercedes SUV sales, as well as higher costs that can't be passed on to customers. Daimler now sees full-year group earnings that are "slightly below" 2017 levels and full-year Mercedes-Benz Vans earnings that are "significantly" lower.

"As another decisive factor, a negative effect on earnings is to be expected in the second half of the year in connection with the new certification process WLTP," the company said on June 21. "Furthermore, earnings at Mercedes-Benz Vans are affected in connection with the recall of diesel vehicles. Additionally, earnings at Daimler Buses are negatively affected by the declining demand in Latin America."