Volkswagen AG posted worse-than-expected earnings in the second quarter amid negative effects from commodity hedging and intensifying competition in China, its most important market.

The German carmaker’s adjusted operating profit came in at €5.6 billion ($6.2 billion), missing analyst projections. VW confirmed its financial outlook for the year but slightly lowered its projection for vehicle deliveries.

Chief Executive Officer Oliver Blume is trying to turn the tide in China, where Tesla Inc. and BYD Co. have raced ahead because they’re better at cranking out electric vehicles with technology and software geared to local tastes.

VW on Wednesday announced plans to invest $700 million in Chinese carmaker Xpeng Inc. and jointly develop EVs to bolster its lineup in the world’s biggest auto market.

Read more: VW Takes $700 Million Xpeng Stake for Pact to Win Back China