One of the world's leading luxury car brands has received regulatory approval from the German government to operate an autonomous, hands-free driving system on public roads, an achievement that represents an important stepping stone along the long and difficult path toward legalizing autonomous vehicles.

Strangely enough, this car company was not Tesla the leader in this field, and instead the achievement went to "Mercedes-Benz Daimler".

After regulatory approval, Mercedes can sell a self-driving package, called the Drive Pilot, for use on parts of Germany's Autobahn network with a top speed of 37 miles (60 km) per hour.

Most importantly, approval will make Mercedes' system "level three" autonomy, meaning drivers can use the system without keeping their hands on the steering wheel.

This is very different from Tesla's more popular "level two" systems, which still require a hand on the steering wheel and the driver's eye on the road.

In a statement, Daimler said customers will be able to purchase a Mercedes-Benz S-Class equipped with Drive Pilot in the first half of 2022.

“Through this LiDAR-based system, we have developed innovative technology for our cars that provides customers with a unique and luxurious driving experience and gives them the ability to spend time,” said Markus Schaefer, chief technology officer, Mercedes-Benz.

Tesla lags behind one of the oldest car manufacturers in the history of the industry when it comes to self-driving vehicles (Anatolia Agency)

In addition to the vehicle's ability to automatically navigate through traffic, the company claims that its system can react to unexpected traffic situations and engage in "evasive maneuvers" when necessary.

And while the news is undeniably important, Mercedes has exaggerated it.

For users, Level 3 autonomous vehicles still require drivers to be prepared to take over when necessary.

There is also a speed limit requirement, which will not be practical when using the system on some empty or crowded streets especially on a major highway.

But what Mercedes' rating will do is score a goal in the competition basket of Tesla, which has already infuriated a German court that found the US company's claim in 2020 when it used the word "autopilot" for its driver assistance program as "misleading".

US lawmakers are also trying to get regulators to investigate Tesla over similar concerns about the effectiveness of autopilot.

From another perspective, this is bad news for Tesla, as the company that is supposed to lead the auto industry into the future lags behind one of the oldest car manufacturers in the industry's 136-year history when it comes to self-driving vehicles.

This is despite CEO Elon Musk boldly declaring that Tesla could have about a million self-driving cars in operation by the end of 2020, which has yet to be achieved.

A host of companies, such as Waymo, Argo AI, Amazon-backed Zoom, and GM's Cruise, are racing. (GM) to make Level 4 self-driving cars a reality within the next few years, but those timelines are optimistic at best.