Dutch regulators have approved the use of Tesla’s self-driving software, with mandatory human supervision, on both highways and city streets—marking the company’s first such clearance in Europe. Tesla hopes this decision will encourage similar approvals across the European Union. The widespread adoption of Full Self-Driving (FSD) is key to Tesla’s long-term growth strategy. A significant portion of its $1 trillion valuation is tied to CEO Elon Musk’s belief that AI-powered autonomous driving and robotaxi services will become major sources of revenue.

The Netherlands approved the system, known as Full Self-Driving Supervised, after more than 18 months of testing and evaluation by the Dutch vehicle authority RDW. The software can control steering, braking, and acceleration. RDW stated that when used correctly, the system can enhance road safety and confirmed it will seek approval for use across the EU.

Tesla is also relying on its self-driving technology to help revive vehicle sales in Europe, which have slowed due to an aging electric vehicle lineup and controversies surrounding Musk’s political views. However, the company saw a rise in European sales in February after more than a year of decline. Analysts expect the approval to boost interest among consumers eager to try the technology. Tesla’s stock rose slightly in after-hours trading, although it has declined significantly this year compared to the broader U.S. market. The company announced it will begin rolling out the feature in the Netherlands soon and aims to expand it to other European countries.

The software is already available in the U.S. as a subscription service, though it faces legal challenges and regulatory scrutiny following accidents and alleged traffic violations. RDW emphasized that European safety standards are stricter than those in the U.S., meaning the EU version of FSD differs from the American one.

Tesla, which is the leading electric car brand in the Netherlands, has around 100,000 eligible vehicles, including Model 3 and Model Y. Unlike many competitors that rely on multiple sensors, Tesla primarily uses cameras and AI for its self-driving system. Other automakers like Mercedes-Benz, Ford, and BMW have introduced limited hands-free driving features, mostly restricted to highways and lower speeds, particularly in Germany. Tesla’s system stands out for its broader usability.

RDW will now submit the system for EU-wide approval to the European Commission. Member states will vote, and a majority decision is required for full regional authorization. Even if it fails to secure majority support, individual countries may still choose to approve it independently. Tesla has indicated it expects a potential EU-wide decision as early as this summer.