German car maker Volkswagen's business is falling short of expectations in Russia, its CEO told CNBC at the Auto China show on Sunday, amid ongoing tensions between Russia and Ukraine.
Reports of a deadly gun attack in Eastern Ukraine over the weekend have revived worries over tensions between the two countries, and the implications for businesses operating in the region.
If the European Union imposes further sanctions on Russia, this could make relations difficult for companies like Volkswagen which has invested heavily in the country.
But CEO Martin Winterkorn told CNBC he did not see any immediate threat to his company's business in Russia.
"In Russia we are building an engine factory, we are building trucks there, we don't see any problems for now. But we are keeping a cautious eye to see how things develop," Winterkorn told CNBC.
Volkswagen sold 300,000 units in Russia last year, according to Volkswagen Russia's website. Since the opening of a plant in Kaluga, a city Southwest of Moscow, the vast majority of vehicles sold there are produced domestically.
The firm had targeted the sale of half a million units in Russia this year and has plans to invest €1.8 million ($2.49 million) by 2018, according to car industry magazine Automobilwoche.
Last month Reuters reported that Volkswagen's finance chief Hans-Dieter Poetsch said the firm was grappling with the effects of the Ukraine crisis, which was placing a "clear burden" on its Russia business. Meanwhile the related volatility in Russia's domestic currency, which has fallen 8.5 percent this year against the dollar, was also proving a headache.
Winterkorn acknowledged Volkswagen was seeing some slowing in traction in Russia.
"At the moment we are not totally on track, our sales figures decreased a little bit but not to the extent that many feared. Ukraine is a different case, but Russia is still doing well though not with the growth rates that we originally expected," he added.