The authorities in Shanghai issued the country's first permits on Sept 16 to conduct operational tests of smart and connected vehicles, marking the latest step in China's efforts to speed up commercialization of autonomous driving.

The permits were issued to Shanghai-based SAIC Motor Group, German premium carmaker BMW AG and China's car-hailing giant Didi Chuxing at the 2019 World Autonomous Vehicle Ecosystem Conference.

Didi is speeding up its efforts in autonomous driving. The car-hailing giant told Reuters in late August that it plans to start using self-driving vehicles to pick up passengers in Shanghai's Jiading district within months.

The service will allow passengers who hail a vehicle in the district via Didi's app to choose whether to be picked up by a self-driving car, according to Zhang Bo, the firm's chief executive officer.

The cars will still be staffed with a human driver, he said, adding that more than 30 different types of car models will be offered in the pilot service, all equipped with Level-4 autonomous driving capabilities.

Didi hopes to run robotaxis in three Chinese cities, Beijing, Shanghai and Shenzhen, by 2020 and intends to launch the service outside the country in the following year, Zhang said.

Earlier this month, Didi said it had spun off its autonomous driving unit into an independent company that will focus on research and seek to deepen collaboration with automakers.

Consulting firm McKinsey said China has the potential to become the world's largest market for autonomous vehicles, which will steer the country's automotive industry into the passing lane.

It estimated that the mass adoption of highly autonomous vehicles in China will start around 2027 and they could account for 66 percent of the passenger-kilometers traveled in 2040, generating market revenue of $1.1 trillion from mobility services.

Of new vehicles sold in the year, autonomous vehicles will make up more than 40 percent, said McKinsey.