Daimler AGs Mercedes-Benz will recall 2.6 million imported and domestically made cars in China due to a software design issue, Chinas State Administration for Market Regulation said in a statement Friday.

A spokesperson for Daimler in China declined to comment further on the recall. Some 774,382 Mercedes-Benz were sold in China last year, the spokesperson said.

Mercedes sold 2.05 million cars worldwide in 2020. Its largest market is

China, accounting for around 35% of deliveries. Asias biggest economy and the globes biggest car market is by far the most important sales region for the automakers highly profitable flagship models, like the

S-Class sedan.

Read more: Renault Sells $1.4 Billion Daimler Stake for Turnaround Funds

Premium car sales in China recovered strongly in the second half, a boon for the financials of luxury manufacturers like Mercedes. German automakers consolidated earnings from China have the potential to receive a further boost from 2022 when new foreign-ownership rules allow EU automakers to raise their joint-venture stakes to above 50%, Bloomberg Intelligence wrote in a note in January.

The recall will start April 12 and involve three batches of vehicles.

  • 2,600,677 units made between January 2016 and November 2020 due to a software design issue;
  • 33 units produced between August 2016 and July 2020 due to a connectivity issue related to a supplier;
  • 333 units manufactured between July 2016 and October 2020 due to a possible issue with connectivity of a communication module.

There may be some overlap between the three categories.

The recall comes days after

an earlier callback involving the German automaker. That one was linked to 125,568 imported and China-made C-Class vehicles manufactured between June 2014 and February 2018 and deemed hazardous due to a safety risk.

Daimler Greater China Ltd. was

founded in Beijing in 2001 and is responsible for the activities of Mercedes-Benz cars and vans, Daimler trucks and buses, Mercedes-Benz Financial Services, Mobility Services, the spare parts business, and research and development centers.

Mercedes-Benz and Chinas

Zhejiang Geely Holding Group Co., controlled by billionaire Li Shufu, last year established a

joint venture to develop premium and intelligent electric vehicles, with both parties contributing 2.7 billion yuan ($415 million). The global headquarters of the venture is in Ningbo in Chinas east with operational sales functions in China and Germany.

With assistance by Charlie Zhu, Chunying Zhang, and Christoph Rauwald

(Updates with context from fourth paragraph.)

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