Light Detection And Ranging (LiDAR) sensor offers solutions to extract real-time information of vehicle’s surroundings and can provide a new opportunity to improve the road safety related issues in mixed traffic conditions. This paper explores fundamental principles and combination of algorithms, to accurately detect, classify and track surrounding vehicles on expressways using a vehicle mounted cost-effective LiDAR sensor in dynamic conditions. The proposed approach employs algorithms such as Density-Based Spatial Clustering of Applications with Noise, Random sample consensus, and Kalman filter on 3D LiDAR data for ground and non-ground points segmentation, object clustering, road boundary identification, vehicle classification and tracking. Trajectory data of the tracked vehicles is used to estimate their relative positions and speeds. The surrounding vehicles were classified into three categories: two-wheelers, four-wheelers and heavy-vehicles. The proposed method achieves an accuracy, precision, recall, and F1-score above 94 %, demonstrating its robustness. The resilience and versatility of the proposed algorithm were validated through comprehensive evaluations on a significant dataset spanning over 8000 km (around 3.6 million frames) of driving data collected under varied environmental scenarios on expressway. Further, various applications of proposed methodology in road safety studies are discussed. The approach can extract real-time micro-level trajectory data for surrounding vehicles on expressways in any lighting condition, which is useful for researchers and can be used in connected and autonomous vehicles. It also provides valuable information for assessing surrogate safety measures and identifying road safety issues and suggesting countermeasures, including advanced and cost-effective driver assistance system applications.