(Bloomberg) -- Volkswagen AG raised its earnings outlook following robust first-quarter earnings, helped by a swift market recovery in China and higher demand for battery-powered vehicles.

Operating return on sales is forecast to come in between 5.5% and 7% this year, compared with a previous range of 5% to 6.5%, Europe’s largest automaker said Thursday in a statement. VW also raised its projection for net cash flow and net liquidity, while cautioning that the semiconductor shortage rippling through the industry will have a “more significant impact” in the second quarter.

“We started the year with great momentum and are on a strong operational course,” Chief Executive Officer Herbert Diess said in the release.

VW is at a pivotal moment in getting its electric-car push off the ground and narrow the gap to Tesla Inc. Among the new models this year are the VW ID.4 and the Audi Q4 e-tron, two crossovers about the size of Tesla’s popular Model Y, as part of the industry’s largest rollout of electric cars.

First-quarter operating profit surged to 4.8 billion euros ($5.8 billion) from 900 million euros last year, when the Covid-19 pandemic shuttered showrooms and factory floors. The operating return on sales jumped to 7.7%.

The German carmaker targets becoming the global EV leader by 2025 at the latest. VW’s shares have soared since Diess wooed investors in March with back-to-back briefings on standardizing key technologies across VW’s 12 brands for scale effects that’ll likely elude both Tesla and established automakers.

The recovery in demand is helping to fuel VW’s costly electric plans. Total deliveries during the first quarter jumped 21% to 2.43 million vehicles, mainly driven by a surge in China. Deliveries of electrified models more than doubled to 133,300 vehicles, of which 59,900 were battery electric vehicle and the remainder plug-in hybrids.

The Wolfsburg, Germany-based manufacturer has targeted selling roughly 600,000 purely battery-powered cars this year and expects to comply with tightening European emission rules.

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