Munich, Germany - Police arrested an Afghan asylum seeker at the scene of what German leaders labeled a car ramming "attack" that injured 28 people, some seriously, in the southern city of Munich Thursday.

The carnage came on the eve of a high-profile security conference in the Bavarian city and amid a heated immigration debate ahead of February 23 elections following a spate of similar attacks.

The vehicle, a Mini Cooper, barrelled into a demonstration held by trade unionists, leaving a trail of injured and their belongings scattered on the street, including a baby stroller.

Police who rushed to the scene fired a shot at the battered car and detained the driver, a 24-year-old Afghan asylum seeker who was named by German media as Farhad N.

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Chancellor Olaf Scholz condemned the "awful" attack and promised severe consequences.

"From my point of view, it is quite clear: this attacker cannot count on any mercy, he must be punished, and he must leave the country," Scholz told reporters.

Shoes, glasses, and the infant stroller were left littered in the wake of the suspected attack, which follows a deadly car rampage at a Christmas market in the eastern city of Magdeburg in December.

Alexa Graef, a witness, said she was "shocked" after seeing the car drive into the crowd, "which looked deliberate".

"I hope it's the last time I see anything like that," said Graef, whose office overlooked the junction where the incident happened.

Police inspected the cream-colored Mini Cooper, leading sniffer dogs around the vehicle.

The 24-year-old Afghan asylum seeker, who lived in Munich, was arrested at the scene after law enforcement fired on the car once, but without hitting him, police said.

The authorities have "indications of an extremist motive" and the investigation has been handed over to the regional prosecutor's office, they added.

Earlier Thursday, a fire service spokesman told AFP that several of those hurt had been "seriously injured, some of them in a life-threatening condition".

The suspect was said to have arrived in Germany in 2016 at the height of the mass migrant influx to Europe. His asylum request was reportedly rejected by German authorities, but he was not slated for deportation.

Bavaria state premier Markus Soeder told journalists that the incident was "just terrible" and that "it looks like this was an attack".

"This is not the first incident... we must show determination that something will change in Germany," said Soeder, whose CSU party is allied with the conservative CDU at the national level.

"This is further proof that we can't keep going from attack to attack," Soeder said.

The attack came as US Vice President JD Vance was expected in the city ahead of the annual Munich Security Conference, which starts Friday.

Also arriving in Munich will be Ukraine's President Volodymyr Zelensky, who is set to hold crucial talks with US representatives over a possible end to the war with Russia.