Beijing, May 15: Shanghai has granted BMW a licence for self-driving car testing, setting up the German luxury brand to become the first foreign automaker to test autonomous vehicles on the road in China.

As global car giants race for an advantage in the world's largest car market, the Shanghai Commission of Economy and Information Technology awarded the two licences for BMW's 7 Series sedans on Monday, the regulator said.

Since the city started issuing the testing permits in March, local state-owned automaker SAIC and Chinese electric vehicle startup NIO have logged more than 6,000 kilometres (3,728 miles) of driving without incidents, the commission said.

But the licences do not give automakers access to all of Shanghai's chaotic streets. Instead, they have a 5.6-kilometre stretch of road to drive up and down, according to state news agency Xinhua.

The autonomous car market is ramping up in China as local upstarts, technology behemoths and foreign automakers go head-to-head to produce what many expect to be the future of transportation.

Internet firms Alibaba and its rival Baidu recently predicted that self-driving vehicles will hit the road in the country within three to five years, and both have made big investments to be at the forefront of the shift.