Volkswagen (VOWG_p.DE) is bracing for a challenging year, it said on Wednesday after reporting that sales at its core division fell for a fourth straight month in January, with demand shrinking in key European and Chinese markets.

January deliveries of VW-branded cars, representing the company's biggest division by sales and revenue, slipped 2.8 percent year on year to 507,100 vehicles.

Sales in Europe and China, which provided almost three quarters of the VW brand's record 6.12 million deliveries last year, eased by 1 percent and 0.7 percent respectively to 124,900 and 265,900 cars, the company said.

In Russia, where the rouble has been hammered by the slump in oil prices and Western sanctions related to the crisis in Ukraine, sales plunged by 28 percent to 6,200 cars.

"We are facing a challenging year," sales chief Christian Klingler said. "VW was not immune to the uncertainties in some regions that have continued into the current year."

Europe's largest carmaker, which sold a record 10.1 million vehicles across the multi-brand group in 2014, is seeking to cut costs at its core division by 5 billion euros ($5.66 billion) over the next two years to narrow the profit gap with rivals such as Toyota (7203.T).