The front of a Co-op store was destroyed and 40 people had to be evacuated in what police are describing as an “ongoing incident” in the Llanrumney area of Cardiff.
In a Facebook post Llanrumney Labour referred to the incident as a “bungled ram raid”.
Residents reported hearing an “explosion” at about 04:00 GMT.
Councillor Keith Jones said the offenders showed a “complete disregard for human life”.
He said it was “incredibly distressing for the families living above those shops” and there had been three attempted ram raids on the shop over the past two years.
About 40 people living in the flats above the shop in Countisbury Avenue had to take refuge at a nearby branch of Greggs.
Two South Wales Fire crews were also at the scene.
One local resident wrote on Facebook: “I heard the explosion literally just after four this morning but didn’t hear any sirens but when I left for work I could see the lights of the police van that is blocking Countisbury Avenue.”
Another said they heard something but could not work out what it was and hoped no-one was hurt.
Mr Jones’ group, Llanrumney Labour, shared a screenshot of an email which said an attempt was made to steal money from the cash machine outside of the Co-op.
It said: “The criminals used oxyacetylene cylinders and when they fled the scene, they set them on fire.
“The police and fire service arrived and evacuated 11 families (around 40 people) from the flats above the crime scene.
“The police called the resilience unit to provide a haven in the short term. An immediate shelter was found in a local Greggs.”
Mr Jones said he and his fellow ward councillors had previously successfully campaigned to install two CCTV cameras at either end of the parade of shops.
He urged police to “urgently review” the footage of what happened in the early hours and see if anyone could be identified.
Llanrumney councillor Lee Bridgeman said the 11 families were evacuated from near the crime scene and added the leisure centre and hotels were put on standby to look after them.
Philip Lancefield, who owns a greengrocers in the same parade of shops, said there had been a few break-ins and a ram raid on the Co-op two years ago but nothing as significant as Friday’s .
Mr Lancefield said: “I’m not particularly worried about my business being targeted but what’s happened is affecting trade here today.”