The developers at CRRC Zhuzhou Institute Co Ltd. have debuted the new mode of transport, called the Autonomous Rail Rapid Transport (ART), which is described as a mixture between a train, a tram and a bus.
The train - which can run at speeds of up to 70km an hour - can hold 500 people and is powered by electricity, running on rubber tyres rather than rail tracks.
With each charge, the new vehicle - which is 30 metres long - can travel 40km and has sensors, which allows it to read specially painted white lines on the road to control its own route.
It is thought the ART could be perfect for medium and small cities who cannot necessarily afford to invest in the infrastructure for a train.
The government have also confirmed that an ART line, stretching 6.5km, will be built in Zhuzhou city, with operations hoping to start by 2018.
Feng Jianghua, chief engineer of the institute, said: "It is like having a virtual rail for the bus ... There is huge demand for urban transit systems with China's urbanization drive."
Autonomous vehicles are currently being developed by many organisations, with Apple recently confirming the technology company are working on products relating to self-driving cars.
CEO Tim Cook said recently: "What we're focusing on, what we've talked about focusing on publicly, we're focusing on autonomous systems. And clearly one purpose of autonomous systems is self-driving cars, there are others. And we sort of see it as the mother of all AI projects. It's probably one of the most difficult AI projects, actually, to work on.
"And so autonomy is something that's incredibly exciting for us, and ... we'll see where it takes us. We're not really saying from a product point of view what we will do, but we are being straightforward that it's a core technology that we view is very important."