The global economic slowdown looks to have finally caught up with Germany's luxury auto makers, with Daimler AG DAI.
XE -2.14% Thursday warning that its core Mercedes-Benz division would miss its profit target for this year.
The owner of the world's third largest luxury car brand by sales blamed increasingly tough competition in China and falling demand in Europe for the expected shortfall.
Until now it has mainly been mass-market manufacturers, such as General Motors Co.'s GM -1.29% European Opel unit, PSA Peugeot Citroen SA, UG.FR -4.30% and Fiat SpA, F.MI -2.28% which have fallen victim to slack economic growth as they appeal to more price-sensitive buyers and generate most of their sales in Europe, where the euro-zone sovereign debt crisis has sapped demand for new cars.
In contrast, Mercedes-Benz and other luxury brands have notched up new sales records so far this year.
But Daimler's warning follows mounting evidence of increasingly tough conditions in China, where some auto makers have reduced prices to entice buyers amid slower economic growth. China has become a key market for luxury car makers as overall sales in Europe have continue to fall sharply.