Berlin/IBNS: German automaker Volkswagen is weighing whether to close plants in Germany for the first time in its 87-year history as the company moves to deepen cost cuts amid rising competition from China’s electric vehicle makers, reports CNN.

Volkswagen, in a statement Monday (Sept 2), said that it could not rule out factory closures in its home country.

Other measures to “future-proof” the company include trying to terminate an employment protection agreement with labour unions, which has been in place since 1994, the German automaker, one of the world’s biggest car companies, said.

“The European automotive industry is in a very demanding and serious situation,” Volkswagen Group CEO Oliver Blume said.

“The economic environment became even tougher, and new competitors are entering the European market," Blume added. "Germany in particular as a manufacturing location is falling further behind in terms of competitiveness."

According to a report by CNN, the German carmaker, which embarked on a €10 billion ($11.1 billion) cost-cutting effort late 2023, is losing market share in China, its single biggest market.

In the first half of the year, deliveries to customers in that country slipped 7 percent on the same period last year, while group operating profit tumbled 11.4 percent to €10.1 billion ($11.2 billion), reports CNN.

The lackluster performance in China comes as Volkswagen loses out to local electric vehicle (EV) brands, notably BYD, which also pose an increasing threat to its business in Europe, as reported by CNN.

“Our main area of action is cost cutting,” the Volkswagen Group CEO told analysts on an earnings call in August, citing planned reductions to factory, supply chain and labour expenses.

“We have done all the organizational steps needed. And now it is about costs, costs and costs,” Blume added.

Volkswagen employs almost 683,000 workers globally, including around 295,000 in its headquarters, Germany, as per its most recent earnings report.