Volkswagen bosses have stressed the “urgent need” for drastic cutbacks after the car giant’s quarterly profits slumped by 64pc.

Europe’s biggest automotive company blamed weak Chinese sales for the sharp drop in post-tax profits, which fell from €4.3bn (￡3.6bn) a year earlier to €1.6bn in the three months to the end of September.

It comes as executives prepare for another round of difficult talks with unions over proposals for factory closure, mass lay-offs and pay cuts.

Arno Antlitz, VW’s finance chief, said: “Our results reflect a challenging market environment and underline the importance of delivering on the performance programs we have launched across the group.

“This highlights the urgent need for significant cost reductions and efficiency gains.”

Sales fell by 0.5pc to €78.5bn in the third quarter of the year and car deliveries dipped by 7.1pc to 2.2m.

The results were partly the result of “the high intensity of competition” in China, VW said, where domestic brands such as BYD, NIO and Xiaomi Auto are storming the market with a range of new, high-tech electric cars.

VW said vehicle deliveries in China had fallen by 10pc in the first nine months of 2024 to 2.1m cars.

On Wednesday, Toyota, the Japanese car giant, also warned of a drop-off of sales in China, where they fell by 18pc.

Volkswagen is facing tough competition in Europe, where government-mandated emissions targets are forcing manufacturers to discount heavily and sell less-profitable electric vehicles (EVs) even as demand for the cars is slowing.

For VW, problems in both these markets could soon be compounded by European Union tariffs on imported Chinese EVs. There are fears that Beijing is poised to retaliate with taxes on cars that are exported from the Continent. Roughly one third of VW’s sales are generated in China.

Tariffs came into force on Wednesday, prompting the commerce ministry in Beijing to declare in a statement: “China will continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.”

Volkswagen’s problems will bolster the case being made by managers that painful cuts are necessary to keep VW competitive and safeguard its future. Oliver Blume, VW’s chief executive, has argued that the company “is at a decisive point in its corporate history”.

The business is seen as being behind its Chinese rivals on development of EVs in particular. As a result, bosses are seeking to ramp up investment in new facilities such as battery factories while trimming costs elsewhere.