1932–1940: People's Car project
Volkswagen was established in 1937 by the German Labour Front (Deutsche Arbeitsfront) in Berlin. In the early 1930s, cars were a luxury – most Germans could afford nothing more elaborate than a motorcycle and only one German out of 50 owned a car. Seeking a potential new market, some car makers began independent "people's car" projects – the Mercedes 170H, BMW 3/15, Adler AutoBahn, Steyr 55, and Hanomag 1.3L, among others.
The growing trend was not nascent; Béla Barényi, a pioneering automotive engineer, is credited as already having conceived the basic design during the mid-1920s. Josef Ganz developed the Standard Superior (going as far as advertising it as the "German Volkswagen"). In Germany, the company Hanomag mass-produced the 2/10 PS "Kommissbrot", a small, cheap rear-engined car, from 1925 to 1928. Also, in Czechoslovakia, the Hans Ledwinka's penned Tatra T77, a very popular car amongst the German elite, was becoming smaller and more affordable at each revision. Ferdinand Porsche, a well-known designer for high-end vehicles and race cars, had been trying for years to get a manufacturer interested in a small car suitable for a family. He built a car named the "Volksauto" from the ground up in 1933, using many popular ideas and several of his own, putting together a car with an air-cooled rear engine, torsion bar suspension, and a "beetle" shape, the front bonnet rounded for better aerodynamics (necessary as it had a small engine).
In 1934, with many of the above projects still in development or early stages of production, Adolf Hitler became involved, ordering the production of a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph). He wanted a car every German family would be able to afford. The "People's Car" would be available through a savings plan at RM990 (US$396 in 1938)—about the price of a small motorcycle (the average income being around RM32 a week).
It soon became apparent that private industry could not turn out a car for only RM990. Thus, Hitler chose to sponsor an all-new, state-owned factory using Ferdinand Porsche's design (with some of Hitler's design suggestions, including an air-cooled engine so nothing could freeze). The intention was that German families could buy the car through a savings scheme ("Fünf Mark die Woche musst du sparen, willst du im eigenen Wagen fahren" – "Five Marks a week you must set aside, if in your own car you wish to ride"), which around 336,000 people eventually paid into. However, the project was not commercially viable, and only government support was able to keep it afloat.[Note 2]
Prototypes of the car called the "KdF-Wagen" (German: Kraft durch Freude – "Strength through Joy") appeared from 1938 onwards (the first cars had been produced in Stuttgart). The car already had its distinctive round shape and air-cooled, flat-four, rear-mounted engine. The VW car was just one of many KdF programs, which included things such as tours and outings. The prefix Volks— ("People's") was not just applied to cars, but also to other products in Germany; the "Volksempfänger" radio receiver for instance. On 28 May 1937, Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH ("Company for the Preparation of the German Volkswagen Ltd."), or Gezuvor for short, was established by the Deutsche Arbeitsfront in Berlin. More than a year later, on 16 September 1938, it was renamed to Volkswagenwerk GmbH.
Erwin Komenda, the longstanding Auto Union chief designer, part of Ferdinand Porsche's hand-picked team, developed the car body of the prototype, which was recognisably the Beetle known today. It was one of the first cars designed with the aid of a wind tunnel—a method used for German aircraft design since the early 1920s. The car designs were put through rigorous tests and achieved a record-breaking million miles of testing before being deemed finished.
The construction of the new factory started in May 1938 in the new town of "Stadt des KdF-Wagens" (renamed Wolfsburg after the war), which had been purpose-built for the factory workers. This factory had only produced a handful of cars by the time war started in 1939. None were actually delivered to any holder of the completed saving stamp books, though one Type 1 Cabriolet was presented to Hitler on 20 April 1944 (his 55th birthday).
1939–1944: Wartime production and concentration camp labour
War changed production to military vehicles—the Type 82 Kübelwagen ("Bucket car") utility vehicle (VW's most common wartime model), and the amphibious Schwimmwagen—manufactured for German forces. One of the first foreigners to drive a Volkswagen was the American war correspondent Ernie Pyle, who had the use of a captured Volkswagen for a few days after the Allied victory in Tunisia in May 1943. As was common with much of the production in Nazi Germany during the war, slave labour was utilised in the Volkswagen plant, e.g. from Arbeitsdorf concentration camp. The company would admit in 1998 that it used 15,000 slaves during the war effort. German historians estimated that 80% of Volkswagen's wartime workforce was slave labour. Many of the slaves were reported to have been supplied from the concentration camps upon request from plant managers. A lawsuit was filed in 1998 by survivors for restitution for the forced labour. Volkswagen would set up a voluntary restitution fund.