• The German automaker saw first-half operating profit before special items hit 11.4 billion euros, exceeding pre-pandemic levels.
• The company now expects an operating return on sales of between 6% and 7.5%, having previously projected 5.5% to 7%.

Volkswagen posted record first-half earnings on Thursday while also raising its target for profit margin.

The results are a marked improvement from the same period last year when demand was ravaged at the height of the Covid-19 pandemic.

The German automaker saw first-half operating profit before special items hit 11.4 billion euros ($13.5 billion), exceeding pre-pandemic levels on the back of increased demand for premium cars in Europe and the Americas, while electric vehicle deliveries almost tripled.

As a result, Volkswagen upped its profit margin target for the second time in three months. The company now expects an operating return on sales of between 6% and 7.5%, having previously projected 5.5% to 7%.

"The record result in the first half of the year is clear proof of how strong our brands are and how attractive their products are," CEO Herbert Diess said in a statement.

"The premium segment performed especially well with double-digit returns, as did Financial Services. Our electric offensive is picking up momentum."

The group lowered its forecast for deliveries in 2021, however, amid "challenging market conditions."

"Challenges will arise particularly from the economic situation, the increasing intensity of competition, volatile commodity and foreign exchange markets, securing supply chains and more stringent emissions-related requirements," it said in the earnings report. Like many major automakers, Volkswagen is feeling the pinch from a global shortage of semiconductors.

Diess told CNBC on Thursday that while the shortage had not impacted earnings significantly so far, it was beginning to come through now.

"We have production bottlenecks just now for the next two, three weeks, and then we believe in improvement of the situation," he told CNBC's "Squawk Box Europe."

"So we will see worsening figures in quarter three, and then recovery in Q4."

Diess suggested that the rebound in demand would be enough to offset the various challenges to the outlook in 2022.

"We can't really definitely say how Covid is to come back in several of our markets, but our order intake is really high, electric vehicle sales are strong, premium brands are doing excellently and we have a very good order book," he said.

"If we don't see a big setback from Covid, we should continue growing first quarter of 2022."

Here are the quarterly highlights:

• Second-quarter deliveries came in at 2.55 million vehicles, up from 1.89 million in the first half of 2020.
• Quarterly group sales revenues were 67.29 billion euros, up from 41.08 billion euros for the same period last year.
• Operating result before special items was 6.55 billion euros, up from -2.39 billion euros last year.

Half of Volkswagen's sales are expected to be battery-electric vehicles by 2030, the German carmaker said in a recent strategy update, while almost 100% of its new vehicles in major markets should be zero-emission vehicles by 2040.

Those objectives are part of Volkswagen's wider aim to be fully carbon neutral by 2050, and Volkswagen has earmarked 73 billion euros for the development of future technologies between 2021 and 2025, around 50% of the company's total investments.

Volkswagen stock is up more than 34% year-to-date.