Volkswagen and its Chinese joint venture partner SAIC Motor Corp plan to shut a factory in Nanjing as early as next year due to declining local sales of some combustion-powered vehicles and the rising popularity of EVs.

Volkswagen AG and its oldest Chinese partner plan to shutter one plant in China and possibly more in response to slowing demand for combustion-engine cars, in a further pullback after the venture’s first factory ceased output.

VW and SAIC are cutting capacity and conducting a strategy review of the Skoda brand in China after a steep dropoff in sales.

Volkswagen and its Chinese joint venture partner SAIC plan to close at least one plant in China due to slow demand for combustion engine cars, Bloomberg News reported on Wednesday, citing people familiar with the matter.