(Bloomberg) -- Continental AG’s shares surged after the company said strong growth in China for its auto unit will help offset sluggish demand in Europe. 

China is expected to be the “main driver of growth” in the second half of the year, Continental said ahead of an investor call after market close on Wednesday.

Continental rose as much as 12% in early Frankfurt trading on Thursday, the most since November 2022, before paring gains. The move helped reduce the stock’s decline this year to about 23%.

Even as EV sales weakened in Europe, Continental sees strong growth coming from China, where EV purchases surged 34% in the first quarter, despite the government removing financial incentives, to now make up roughly 40% of overall car sales.

Meanwhile, Continental said the benefit from recent cost cuts began to show in the second quarter and will have a greater impact on profit in the second half of the year. And while the auto division is still burdened by delays in ramping up some production but expects to see “stepwise improvements” from lower freights and inventory management, the company said.

(Updates with additional details beginning in third paragraph.)

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