Kepler Equities reportedly raised its price target for Volkswagen AG to €42 from €38 on Friday, citing prospects that cost cuts will boost earnings at Europe's biggest car maker.

"While we slightly adjust our 2005 estimates downwards for currency reasons and lower China profits, we have increasing confidence in a sharp rebound to follow as a result of increasing cost-cutting efforts during the year," it said in a note to clients cited by the Reuters news agency.

It reportedly said it thought VW could chop up to €4 billion ($US5.21 billion) from costs even after completing its current ForMotion efficiency drive.