Renault, the French car-maker, posted a sharp drop in its operating income for the first half yesterday, largely because of the impact in Europe of a price war, rising raw material costs and weaker sales.

The group made €943m (£650m) compared with €1.1bn a year earlier, with the operating margin down from 5.4% of sales to 4.4%. Renault said it expected the full-year margin to stay above 4%.

Global vehicle sales rose 3.8% to 1.36bn, and both Renault Samsung and Dacia returned to profit. Overall net income rose from €1.45bn to €2.2bn because of increased contributions from its stakes in Nissan and Volvo.

Nissan, in which Renault has a 44% stake, contributed €911m and Volvo, in which it has a 22% stake, €167m. The company also benefited from a gain of €160m on the sale of land in Madrid and of €150m from the disposal of an 18% stake in Nissan Diesel Motor.

Renault warned second-half earnings would decline. But it cut net debt to €787m.