The genesis of the company known as Volkswagen goes back to Adolf Hitler’s desire to put the German people on wheels, much as Henry Ford had done with the Model T for Americans. At the time in Germany, cars were very expensive, and thus only enjoyed by the very wealthy. Only one German in 50 owned a car in the early 1930s. Hitler wanted to change that, he wanted to democratize automotive transportation.
To accomplish this, he issued a “call for proposals” to ready the production of a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph), which could be sold profitably for 990 Reich Marks (Just under $400 American in 1930). The proposals he got back soon made him realize the price point he’d set could not be met by private industry, so he decided to establish an all-new, state-owned factory to construct the automobile.
To help German citizens buy one, he started a government-sponsored savings program. Anyone who’d set aside five RM a week into the savings program could purchase one of the cars. Each five RM deposit got the customer a stamp to go in a stamp book, once the book was full, they could get the car. Some 336,000 German citizens paid into the fund. Based on a design by Ferdinand Porsche, the rear-engined, rear-drive car took on a rounded shape, which reminded people of a beetle.
And so the name stuck—unofficially.
Interestingly, a number of car designers had worked on the idea before Hitler put it forth. There were several competing concepts already in progress. One such designer, Ferdinand Porsche, had been trying to get a number of manufacturers interested in such a project for quite a few years. A prolific designer, Porsche was responsible for the conceptualization and development of everything from full-on battle tanks to aircraft and the world’s most coveted sports/racing cars.
Porsche built what he called the "Volksauto" from the ground up in 1931, putting together a car with an air-cooled rear engine and torsion bar suspension. The "beetle" shape came about because the front hood had to be rounded to improve its aerodynamics in order to get the most benefit from the small engine. BTW, that first Beetle was one of the earliest cars to be tested in a wind tunnel, a common practice today. Because of work Porsche had done for the German military, Hitler selected Porsche’s design and commissioned him to build it.
In addition to designing the car, Porsche also had to design a factory to produce it. Construction began on the 26th of May in 1938. It was situated in a purpose-built town Hitler called Kraft durch Freude Stadt (derived from the Nazi party's motto, "Joy through Strength"). Further, Hitler decided Porsche's creation should be named the KdF-wagen, an abbreviation of the term. The town was also created to house the workers of the new factory. Sadly, only a few of the new cars had been completed by the time World War II started in 1939. None of the stamp book holders ever got to trade their book for one. However, a convertible prototype of the Beetle was presented to Adolf Hitler on the occasion of his 49th birthday on April 20, 1938.
While series production of the Beetle had to wait until after the war, its platform was employed in the design and execution of a number of military vehicles. It later came out; the Nazi Party (remember, the factory was government-owned) used forced slave labor to build the vehicles emanating from the factory during the war. Some 15,000 people were forced to build them. In 1998, Volkswagen started a restitution program to compensate the descendants of those people.
After the war, the name of the car was changed to Volkswagen, and the town was renamed Wolfsburg. Major Ivan Hirst of the British Army was given the task of overseeing putting the heavily bomb-damaged factory back into production. Even though wartime plants were supposed to be dismantled, Hirst had one of the factory’s cars painted green and demonstrated to his higher-ups. They liked it and placed an order for 20,000 of them. That’s right, the first people to get the German “People’s Car” were actually English.
Still, they needed someone with automotive experience to run the company. It was famously offered to the Ford Motor Company for free. Henry Ford II (Edsel Ford’s son) went to Germany, took a look at it with Ernest Breech, then-chairman of the Ford Board of Directors. Breech told Ford it wasn’t worth the trouble and Ford passed (!). The English ultimately left the Germans to restart the factory under the guidance of Heinz Nordhof, a former Opel executive, in 1948.
Nordhof's decision to focus on the one model proved to be a shrewd strategy. A sports version (the Karmann Ghia) and a minivan-type iteration (the VW Bus) were developed off of the platform, but by and large it was all-Beetle, all the time. The first Beetle came to the U.S. in 1949, but only two of them sold that year. Volkswagen of America was formed in 1955 to organize the distribution and servicing of the vehicles.
VWoA engaged the Madison Avenue ad agency Doyle, Dane Bernback, which proceeded to position the Beetle favorably with younger, more sophisticated car buyers. The ads clicked, sales took off, and VW ultimately sold some 21,529,464 of the cars worldwide—easily making it the best-selling automobile of all time. BTW, it was never officially called the Beetle. Volkswagen referred to the car throughout its lifespan as the Type 1. Production of the VW Type 1 officially ended in July of 2003 in Puebla, Mexico.
When it became obvious the days of the air-cooled VW were numbered, the company introduced its follow-up, the 1974 VW Golf. Where the Type 1 had been air-cooled, rear-engined, and rear-drive, the Golf was liquid-cooled, front-engined, and front-wheel drive. The success of that vehicle begat a host of similarly configured automobiles, culminating in the turbocharged, 12-cylinder, all-wheel drive Volkswagen Phaeton ultra-luxury sedan.
Today, Volkswagen is one of the three largest automobile companies in the world.
And yeah, Henry II screwed up—big time.
Oh, by the way, a contemporary version of the Beetle, brought back in 1998 as the “New Beetle”, is still in production.