January 22, 2019 12:30 PM, EST

Tesla Gets Green Light to Start Delivering Model 3 in Europe

Tesla model 3 sedanPatrick T. Fallon/Bloomberg News

Tesla Inc. received permission to start selling its Model 3 in Europe, clearing the final hurdle in bringing the electric-car maker’s top seller to the home turf of Audi, BMW and Mercedes-Benz.

Deliveries should start in February for the Long Range Battery version of the midsize sedan — the same variant first sold in the U.S. — according to Tesla, after Dutch vehicle authority RDW issued the OK.

The European launch is crucial for Tesla as it navigates what CEO Elon Musk called a “very difficult” road ahead. The company is cutting jobs so it can profitably deliver lower-priced versions of the Model 3, Tesla’s first car targeted for the mass market. Musk has pointed to sales of the sedan in Europe and China as a main reason he isn’t concerned about any potential setback caused by a halving of the U.S. federal tax credit, to $3,750, on Tesla purchases as of Jan. 1.

Tesla Graph

With the Model 3, Tesla also has an opportunity to broaden its attack on the premium car market dominated by Germany’s BMW AG, Daimler AG-owned Mercedes-Benz and Volkswagen AG’s Audi. Tesla, based in Palo Alto, Calif., said in its third-quarter shareholder letter that “the midsized premium sedan market in Europe is more than twice as big as the same segment in the U.S.”

The Model 3 became the top-selling luxury car there last year, outstripping the Audi Q5, BMW 3 Series and other well-known models. Analysts and industry executives, however, have observed that competition with Tesla cuts across traditional categories.

“Teslas are stealing customers away from vehicles that you might not expect,” EvercoreISI analyst Arndt Ellinghorst said in a report last week, after Toyota Motor Corp.’s North American chief, Jim Lentz, discussed the impact of the Model 3 on the Prius, a hybrid that’s not marketed to luxury buyers. The Toyota executive said Tesla has created a new segment of so-called technology-driven products.