SHANGHAI—Mercedes-Benz parent Daimler AG is investing in a Chinese self-driving startup, in another instance of a Western auto maker seeking out a Chinese partner to get a foothold in a challenging market.

The Stuttgart, Germany-based automotive giant made its first ever investment in a Chinese startup this week, taking part in a $46 million funding round for Momenta, a Beijing-based firm providing road sensors and high definition mapping software.

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