At first glance the Volkswagen Passat on display in London's Science Museum seems to be nothing exciting. But underneath the normal looking exterior is a collection of lasers, sensors and servos that allow the car, dubbed the LUX, to drive itself with no human intervention.

The car, developed by German company Ibeo, uses pair of near-infrared laser scanners, housed under the front lights, with another at the back of the car, to scan the area in front and behind the car.

These scanners produce images of the road and potential obstacles up to 200m ahead of the car, in all weather conditions, which are processed by a central computer along with other information, such as GPS signals, to drive servos that control the pedals, gearshift and steering wheel.

The car has so far been tested at speeds of up to 15mph, but it will have to increase that to 30mph by November, when it takes part in the third annual US Defence Advanced Research Projects Agency (Darpa) Urban Challenge, competing for the $2m prize.

"We are competing against the world's best in terms of automobile technology, " said Ulrich Lages, chief executive of Ibeo

"Although we are a relatively small team and, unlike the big players, do not have a large budget, we believe we have a great chance at Darpa 2007. Our innovative laser technology gives us a lead of several years over our prospective rivals, especially in the field of object and environmental detection."

For this year's Darpa Urban Challenge the cars must safely conduct simulated battlefield supply missions on a 60-mile urban area course. They must obey traffic laws while merging into traffic, navigating traffic circles, negotiating busy intersections and avoiding obstacles in fewer than six hours.

The car will be programmed with a layout of the area and details of certain areas it has to visit, but after that it must work out the route and travel the course safely with no human intervention.

Tracker cars will follow the vehicles in case something goes wrong.

"It was an important step to have autonomous ground vehicles that can navigate and drive across open and difficult terrain from city to city. But the next big leap will be an autonomous vehicle that can navigate and operate in traffic, a far more complex challenge for a 'robotic' driver. So this November we are very excited to be moving from the desert to the city with our Urban Challenge," said Tony Tether, Director at Darpa.

Whilst driverless cars are unlikely to be commercially available any time soon, the technology developed for these challenges can be adapted to help assist drivers by predicting potential hazards and help prevent fender benders while parking and turning in confined areas.