The California Department of Motor Vehicles has approved Mercedes-Benz's automated driving system on designated highways under certain conditions without the active control of a driver.
California is one of Tesla's largest markets, accounting for 16 percent of the automaker's global deliveries last year, according to Reuters calculations.
But Mercedes beat Tesla to become the first automaker to receive authorization to sell or lease cars with a Level 3 automated driving system to the public in California. Earlier this year, the German automaker also received an approval to deploy automated driving systems on Nevada's roads.
The approval was granted to Mercedes' Drive Pilot system that allows drivers to legally take their eyes off the wheel but they must be available to resume control if needed.
The system can only operate on highways during daylight at speeds not exceeding 40 miles (64 km) per hour, the DMV said.
Mercedes said in a statement it will make the automated driving system available in the U.S. as an option for its S-Class sedan and EQS SUV vehicles.
The first deliveries for these models are expected later this year.
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Other systems currently on public roads such as Tesla's Autopilot or General Motors' Super Cruise are classified Level 2, which handle some driving tasks but require drivers to pay attention at all times.
Tesla calls its Level 2 driving assistant system Full Self-Driving and says a driver must constantly supervise the feature and intervene as needed to maintain a safe operation.
The permit grants Mercedes permission to offer its system on California highways in the Bay Area, Central Valley, Los Angeles, Sacramento and San Diego and on interstate highway connecting Southern California to Nevada.
