Mercedes, BMW flash warning lights on China

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Subscribe to enjoy similar stories. China’s weak consumer economy has claimed another victim: luxury cars. Mercedes-Benz late Thursday became the second luxury carmaker in as many weeks to cut its earnings guidance for the year.

Like its Bavarian rival BMW, which warned on profits last week, the Stuttgart-based company blamed the downshift on affluent consumers in China growing more cautious, among other reasons. “We wanted to do more, but when in your biggest market your main clientele in all sorts of regards is sitting on the fence, it makes it certainly more difficult," Chief Executive Ola Källenius said on a call with analysts Friday. The car maker’s stock fell 6% in European morning trading.

The warnings from southern Germany echo the more cautious tone of the French luxury industry in recent months. Handbag makers such as LVMH and Kering have spooked investors with declining sales in the crucial Chinese market. Problems at Mercedes and BMW also signal deepening troubles for the global auto industry, which is contending with the impact of high interest rates and a costly shift to electric vehicles.

China’s luxury car market had until recently been a relative bright spot, with consumers still favoring traditional engines and lucrative top-end models such as the Mercedes-Benz S-Class. This year, the mood has turned: In the eight months through August, customers in China bought 10% fewer cars from Mercedes and 11% fewer from BMW, according to vehicle-insurance data collated by brokerage Bernstein. While a government trade-in policy has revived Chinese car sales overall in recent months, it doesn’t apply to vehicles with larger engines, which are often made by German companies.