VW reported an operating profit of €1.72 billion ($2 billion) for the third quarter - down by 48 percent compared with a year ago — but well ahead of market expectations of €1.49 billion.

The group warned last month that it would have to set aside more cash to deal with the fallout of its diesel emissions scandal in the United States, saying the recall of around 500,000 cars required provisions of €2.6 billion.

The costs of fixing 2-liter cars caught up in the scandal were proving "technically more demanding than anticipated," VW said.

The charge brings the total of VW's Dieselgate costs to €14.5 billion, but company figures show that the carmaker is still sitting on €25.4 billion of cash. Chief executive (CEO) Matthias Müller said VW group was in a "strong, robust financial condition."

VW lifts profit margins

Aside from what the company delicately refers to in financial reports as "the diesel question", VW reported a broadly stronger performance between July and September than last year.

Revenues increased 5.8 percent year-on-year, to €55 billion, roughly in line with a 6.3-percent increase in unit sales to 2.65 million vehicles.

Read more: VW says new diesel engines are clean

More importantly, the 12-brand group was able to lift its full-year profit margin, saying margins before special items in the first nine months were 7.7 percent, up from 7.0 per cent a year earlier. The previous margin target was between 6 percent and 7 percent.

"The third quarter result is impressive and backs up customers' trust in our brands and their products," CEO Müller said in a statement.

Looking ahead to other company figures for the whole of 2017, the group expects "slightly higher" unit sales than in 2016 and revenue "more than 4.0 percent higher.

uhe/nz (Reuters, AFP, dpa)