German car and truck maker Daimler missed quarterly revenue forecasts and warned strong demand for cars in the key emerging markets of China and India is likely to slow sharply.
Premium and mass-market carmakers have looked to fast-growing markets such as China to make up for sluggish sales growth in Europe, although China's car market, the world's biggest, is seen cooling this year due to rising fuel prices and tighter rules on car registrations.
Year-on-year wholesale vehicle sales growth of Daimler's luxury Mercedes-Benz cars in China tumbled to 8 percent in the second quarter from 82 percent in the first.
Demand for cars in the major emerging markets of China, India, Brazil and Russia will probably continue to grow. But rates of growth in China and India are likely to be distinctly lower than last year, Daimler said on Wednesday.
And the global truck market will likely grow only moderately this year, said Daimler, the world's No.1 truckmaker, on slowing demand in China and a weaker Japanese market following the March 11 earthquake and tsunami.
Daimler, which also makes Smart cars, reported stronger-than-expected operating results for the second quarter, partly thanks to strong sales of vans and buses, and gave an upbeat outlook for the full year.
Its shares were down 0.3 percent at 51.66 euros by 1025 GMT, compared with a 1.2 percent lower STOXX Europe 600 Automobiles & Parts index.
Even though profits came in strong, Daimler's sales have disappointed. And in the very demanding car sector, that's enough to send the shares down, a trader said.
French carmaker PSA Peugeot Citroen's warning early on Wednesday that the Japanese earthquake would hit profit also weighed on Daimler shares, traders said.
Daimler rival BMW, which is due to publish quarterly results on August 2, this month raised its 2011 outlook, citing strong demand on the international auto markets.
Emerging markets have generated almost three-quarters of world growth over the past two years, but there is concern that inflation in China, the world's second-largest economy, could prompt a slowdown in emerging markets across the board.
Daimler's comments on emerging markets chimed with Peugeot, which earlier pared its forecast for growth in China to around 7 percent from 10 percent.
Peugeot had boosted its forecast for the Latin American market and said the Russian market would grow by about 30 percent, more than twice as fast as it previously had expected.
The Russian car market has been recovering rapidly from the global economic crisis, helped by a twice-extended scrappage scheme, and is on track to become Europe's biggest car market.
Daimler, which sees demand for cars and trucks in Russia expanding by a strong double-digit rate, owns 11 percent of Russia's top truckmaker Kamaz, and CEO Dieter Zetsche said on Wednesday he would look at opportunities to raise that stake.
Daimler's second-quarter earnings before interest and tax (EBIT) rose 23 percent to 2.58 billion euros ($3.73 billion), which beat an average estimate of 2.49 billion euros in a Reuters poll.
Second-quarter revenue rose about 5 percent to 26.34 billion euros ($38.12 billion), missing an average estimate of 27.99 billion in a Reuters poll. Still, analysts believed the second half of this year could bring fresh growth for Daimler.
We're optimistic. Mercedes has some important model launches during 2011 and should see capacity utilization benefits from new SUVs and new small cars heading into 2012, Bernstein analyst Max Warburton said.
Daimler said it now expects 2011 EBIT to very significantly exceed the year-earlier level. Analysts on average see that figure at 9.15 billion euros, up almost 26 percent from 2010.
The overall economic outlook, though, has distinctly worsened at the beginning of the second half, it said.
(Reporting by Maria Sheahan; Additional reporting by Daniela Pegna; Editing by Will Waterman and David Hulmes)