UPDATE 1-Daimler shares drop 2.5 pct after excess emissions report

* More than 1 mln Mercedes emit excessive pollution -paper

* Mercedes owner Daimler says cooperating with authorities

* Daimler says sees no need to take cars off the road (Adds analyst comment, background from emissions probes in the United States and Germany)

FRANKFURT, July 13 (Reuters) - Shares in Mercedes maker Daimler fell 2.5 percent in early trade on Thursday after a report accusing the carmaker of possibly selling more than a million cars with excess emissions in Europe and the United States.

On Wednesday, Sueddeutsche Zeitung, citing a search warrant issued by a Stuttgart court reported that prosecutors were examining the possible use of illegal software to manipulate emissions tests in Mercedes-Benz vehicles between 2008 and 2016.

Daimler declined to comment on the continuing investigation and said it was fully cooperating with the authorities.

Analysts said the reports were bound to spook investors, even if the company saw no cause to ban any of its vehicles from public roads.

"Clearly some investors will wish to take risk off the table," Evercore ISI's automotive analyst Arndt Ellinghorst said in a note.

In May, Stuttgart prosecutors, who are working with authorities in the United States, conducted sweeping raids of 11 sites in Germany as part of a probe into Daimler and excessive diesel emissions.

The searches were initiated in the course of investigations "against known and unknown employees at Daimler, who are suspected of fraud and misleading advertising connected to manipulated emissions treatment of diesel passenger cars," the Stuttgart prosecutor's office said at the time.

That same month, Daimler dropped plans to seek U.S. approval to sell 2017 Mercedes-Benz U.S. diesel models.

The U.S. Justice Department, the Environmental Protection Agency (EPA), the California Air Resources Board (CARB) and a prosecutor in Stuttgart are investigating emissions of Mercedes-Benz diesel vehicles.

In its quarterly report, Daimler had said that steps taken by U.S. authorities against another manufacturer in January identified software functionalities that are "common in diesel vehicles" as illegal defeat devices.

"If these or other inquiries, investigations, legal actions and/or proceedings result in unfavourable findings, an unfavourable outcome or otherwise develop unfavourably, Daimler could be subject to significant monetary penalties, remediation requirements, vehicle recalls, process improvements and mitigation measures," Daimler said at the time.

In January, the EPA and CARB accused Fiat Chrysler Automobiles NV of illegally using software to allow excess diesel emissions from 104,000 U.S. trucks and SUVs. Regulators have refused to grant Fiat Chrysler approval to sell 2017 U.S. diesel models. (Reporting by Georgina Prodhan, Edward Taylor; and Ilona Wissenbach; Editing by Victoria Bryan and Maria Sheahan)