Volkswagen AG’s Audi-led premium brands barely eked out an operating profit in the third quarter after waning luxury spending in China and a plant restructuring in Brussels dragged on returns.

Operating earnings slumped 91% to €106 million in the three months through September, the group said Tuesday. Deliveries of the Audi brand in the first nine months of the year fell in markets including Europe, China and the US.

Volkswagen’s premium brand group - which also includes Lamborghini, Bentley and motorbike maker Ducati - is facing intensifying competition in China, where buyers gravitate toward local models. A €1.2 billion one-time charge to cover restructuring expenses for an Audi plant in Brussels also weighed on the results.

“We indeed see a very intense price competition in Europe and especially in China,” Audi chief financial officer Jürgen Rittersberger said on a call with reporters.

Sluggish EV demand and intense competition from the likes of Tesla Inc and China’s BYD Co have pushed Audi parent Volkswagen to pursue cost-cutting. The automaker and labour representatives are currently in negotiations over reductions affecting the main VW brand, with possible moves including shuttering factories, laying off workers and cutting wages.

Last week, Audi said it’s in contact with a potential investor for its Brussels factory. The site may have to close due to high operations costs and poor demand for the sole electric model produced there.

  - Bloomberg