Volvo Car expects growth in Europe and a recovery in the U.S. to spur significantly stronger sales in the second half of the year, despite continued challenges in China. The Swedish car maker—which is majority-owned by China's Zhejiang Geely Holding Group—said Friday that the auto market in China weakened for the whole industry during the first half while global uncertainty stemming from the Middle East conflict increased.

However, after several months of sales declines in the U.S., the market there is showing signs of recovery with two consecutive months of growth in May and June, it said. "We expect this recovery to continue in the second half of the year as the negative effects from the incentive withdrawal lessens."

The company's outlook reflects improving conditions in key Western markets even as China remains a drag. Volvo Car's reliance on European demand and a rebounding U.S. market underscores its strategy to offset weakness in the world's largest auto market.