According to Hitler’s requirement, Porsche designed a rear-engined car with an air cooled flat four engine. Using air cool because the dictator thought his kingdom would soon expanded to the African desert. The car was not particularly advanced, but it was designed with care, especially taking into considering reliability, economy, ease of production and maintenance. Now we know this is the Beetle, or what the American describe as Bug. 

In 1941, the great factory was built (out of the mandatory deposit from German people) and pilot run was completed. The broke out of WW II transformed the factory into an arsenal. The Volkswagen car was also modified to military vehicle which was really used in the North African desert. The road car was put into shelf until the war ended. 

After the war, the district where the factory located came under British forces’ control. The British examined the car and was not very interested to produce it in their home country, so they helped the German to rebuild the factory and renamed there to Wolfsburg. (Today Wolfsburg is still the headquarters of VW and the factory is the biggest car plant in the world.) Under the scarce of resources, the German gradually increase the production and even export to the US, where it arose a fever. 

The Beetle was produced through the 90’s (in Mexican plant) and resulted in a total of 21,000,000 units built, which broke Ford Model T’s record of 15,000,000.  

So far our story seems like the history of Beetle. In fact, Volkswagen was simply a one model company until the 70’s. It tried to find a new design to replace the car but every time failed - the 1500 in 1961, the 411 in 1968 and the front-wheel-drive K70 in 1970. The hatchback Polo, which was based on Audi 50, relieved some pressure, but the declining sales of Beetle eventually drove the company into a loss in 1974. 

Luckily, the same year launched the Giogiaro-designed Golf (American called it Rabit), a car that saved the company and became another core model in the following 25 years with 4 generations introduced. Today, Golf is still the best selling car in Europe. 

For most time of its history, Volkswagen group remained to be a largely German company, as it consisted of VW and Audi only. Since the 80s it started going internationalize - Seat was bought in the mid-80s, Skoda in the early 90s, then in 1998 Ferdinand Piech bought 3 brands in a row: Lamborghini, Bugatti and Bentley.

• Seat  (Spain)
  
• Lamborghini (Italy)

Although Auto Union was described as the "second largest car maker in Germany", in then mass production was not yet appeared there, unlike USA, France and Italy. The Auto Union concentrated on making luxurious cars in limited amount, and took part in motoring racing with a mid-engined GP car designed by Ferdinand Porsche. In circuit it was beaten by Mercedes-Benz, as in road car production. 

The road car division was really weak, not just in terms of output but also in terms of reputation. Open any classic car book and you can hardly find a single Auto Union car. In fact, it still produced cars powered by 2-stroke engines until the 60’s. 

It was acquired by Daimler-Benz in the 50’s but not much was done. Volkswagen bought it in the mid-60’s, enlarging its factory to build popular Beetle. More money was invested to develop a new four stroke engine and new cars. Further helped by the integration of NSU, which was renowned for engineering innovation and merged with Auto Union to form Audi NSU in 1969 after bankrupted, Audi developed the first mass production models, 80 and then 100. The latter set a production record of over 800,000 units since its introduction in 1976. 

The 80 and 100 continued to evolve into today’s A4 and A6, but it was not as easy as thought. Until the mid 90’s, Audi was regarded as lack of a distinctive identity - neither bread and butter nor prestigious. The invention of Quattro in 1980 would have built a solid sporty image, but the mass production, front-wheel-drive models failed to impress keen drivers. Volkswagen wasted a lot of money and effort to put the company onto rails, first with improved build quality, then introduced a V6 and V8, and then even more advanced technology. 

In 1985, Audi NSU was renamed to simply Audi AG.

Despite of the challenge from Alfa Romeo, Audi and Lexus, BMW still builds the best sports sedans in the world. Alfa and Jaguar had been there decades ago but both of them ignored the potential of the sports sedan market. BMW took it with 02 series in the 60’s and never look back.  

While it was still performing good, its subsidiary Rover was on the contrary. BMW purchased the Rover group in 1994, making it the 7th largest European car maker. The British group was declining since the 70s but it has a rich collection of many valuable marques, such as Austin, Healey, MG, Triumph and the King of off-roader, Land Rover. (Among these brands, only MG, Rover and Land Rover are now being used, plus the model Mini now sees as a brand name) However, group CEO Bernd Pischetsrieder gave the British arm too much independence, without sharing much cost with BMW itself. Moreover, flawed design of Rover 75, wrong market positioning of Rover 200 and 400, and build quality problems for Land Rover Freelander also contributed to the sales decline. As a result, Rover has recorded heavy loss for 2 successive years. 

Therefore Bernd Pischetsrieder, together with the no. 2 man, Wolfgang Reitzle, were sacked in 1998. In April 2000, BMW eventually sold Rover (plus the marque MG, Austin, Healey, Morris and Wolseley) to a group called Phoenix. "Jewel of the crown" Land Rover was sold to Ford for covering the loss made by Rover. BMW only retains the Mini brand (plus Triumph and Riley) and the Crowley plant in which the production of new Mini takes place. 

Apart from the various brands held by ex-Rover, starting from 2003 the famous Rolls-Royce name will also come under BMW's control. Although Volkswagen beat BMW to buy Rolls-Royce and Bentley in 1998, the former threaten to withdraw the "Rolls-Royce" brand name via the relationship with jet engine maker, Rolls-Royce Plc, which owns the rights to the brand and favoured BMW right from the beginning. Therefore the German rivals made an agreement : until 2003, RR will still be ran by VW; after that BMW will take back the name and produce RR in a new factory in Goodwood. See Rolls-Royce for more details.

Its first production car was a simple and cheap car named "Dixi", which was simply an Austin Seven produced under licensed. However, it was the 2-litre sports car 328 which made reputation for the company in 1936. This elegant and aerodynamic efficient sports car had strong presence in motor racing and took a class victory in Mille Miglia. 

After WWII and a 3-year ban of production by Allies, it started working on its own mass production car. The model 501 was presented in 1951. Then came the classic V8 sports car 507. However, BMW was not classified as a volume car maker by making these commercially unsuccessful models. What it needed is the model 1500 which appeared in 1962. The compact sport sedan pointed to the correct direction, which led to even more success in the following 02 series. With the powerful 2002 and even 2002 turbo, BMW emerged as an expert of sports sedans.  

The Motorsport division was established in 1972 and developed the M-cars, starting from the mid-engined M1. At the same year, the business expanded to larger cars, 5-series. 

When the 3-series was launched in 1975, there was still no one else realised the potential of the market opened by BMW. When Mercedes finally did it with the 190E in 1985, the 3-series had already entered its second generation. The third generation in 1991 was even more successful, it left a record that the current generation hard to match. 

BMW continued going upmarket by introducing 7-series in the early 80’s. The first generation was not really as luxurious as Mercedes’ big model, but the second generation in 1987 really did that. It even introduced a V12. 

However, BMW is not always successful. The replacement of 6-series by the big and expensive but cramped 8-series was a failure. The Z3 roadster also received many criticism about its handling as well as styling. Luckily, BMW did not make such mistakes in its main stream sedan models. 

Another failure is the take over of Rover Group in 1994. The loss in Rover nearly offset the profit generated by its German mother company so that BMW eventually sold it in 2000.

Mercedes-Benz

The first car designed by their own appeared in 1902, but until 1906 they built just 1000 cars of all kinds. The breakthrough occurred in 1909 with the Opel 4/8 hp model, which was modest but reliable and cheap. The success of this model, combined with advancer production system, meant that by 1914 Opel had become the largest German motor vehicle makers. 

Mass production came in 1924, helped it to regain the no. one spot of German sales chart in 1928. That year it sold 43,000 cars. The economic crisis in late 20’s result in the take over by General Motors in 1929. Like today, GM did not intervene the development of cars. With the support from GM, Opel out-performed the bankrupted Citroen and became the European no. 1 in 1935. By then the sales reached 100,000 cars annually. 

During the war Opel was quite lucky under Allies’ bombing, thanks to the GM-link. After the war it was also the first to resume full operation. By 1950, production rose back to the 100,000 cars mark. However, through the years the company has little innovation or memorable cars created. Even the Opel GT of the mid-60’s was not really considered as classic cars by experts.  

Undoubtedly, the post-war sales chart was dominated by Volkswagen, except in the early 70’s when the production of Beetle declined. VW took back the lead with Golf and further rocketed away.

Back in 1931, he created the company bearing his name. However, in then the company Porsche was an engineering consultant instead of a car maker.  

As the old Dr. Porsche was half retired after WW II, his son Ferry succeeded the job. Ferry Porsche had been trained in Bosch and effectively took over his father’s position when the latter was still in jail. In order to raise money for releasing his father and his sister’s husband, Piech (who was the father of Ferdinand Piech, the current CEO of Volkswagen), Ferry Porsche designed a Grand Prix car for Cisitalia. The car was powered by a 12-cylinder boxer engine with 4-valves head and supercharger. 

At the same time, he also started working on his own car. Both Porsches designed many cars for others, but a car bearing their family name did not appear until 1950, that was the 356. The car was designed with reliability and price very much in mind. For cheap and reliable sourcing of parts, the rear suspension and engine were carried over from the Beetle. However, the air cooled engine received some modifications, hence more power.  

The car turned out to be more popular than expected, thanks to its elegant build and good look. During the production run of 15 years, some 76,000 cars were produced. Anyway, the Volkswagen root prevent the car from upgrading any more, so Ferry Porsche started working on an even faster, better and more expensive model, 911, which was launched in 1964. 

First to be noticed is the use of Porsche’s own boxer engine, now with 6 cylinders and a full 2-litre displacement, and its own synchromesh 5-speed gearbox. The car was styled by Ferry’s eldest son, Butzi Porsche. As you must know, the 911 achieved even greater success with 400,000 units built in 34 years. It was also regarded as the most successful sports car in history. 
    

The first 911 turbo

The 911 received many update and upgrade through the years. However, there were times the company itself thought the car could be no longer upgraded. That called for a successor to be developed in the early 70’s. That was the frong-engined, V8-powered 928. When it was launched in 1977, it won the European Car of The Year award. However, the company soon realised that the car was too heavy and too expensive to be a real successor to the 911. Therefore it gradually evolved into a luxurious Grand Tourer. 

At the same time, a smaller car called 924 was developing as a reaction to oil crisis. The front-engined 2+2 was powered by a 2-litre inline-4. Launched in 1976, it became a hit. In later years it was further developed into 944 and then 968 until the final curtain dropped in 1995. 

As a result, from the late 70’s to the late 80’s, Porsche had its golden years with a model line up consisted of a trio - the four-cylinder 924 / 944, the six-cylinder 911 and the 8-cylinder 928. The all-time sales record of over 50,000 units was recorded in the mid-80’s. 

Right after the peak was several years of sales slump, mostly due to the rising Deutsch mark and high salary which made Porsche's cars too expensive to be affordable, especially is under the competition from Japanese coupes. The situation once became so worse that the company was struggling for survival. Both the 928 and 924 were too old and had to be retired. A 4-doors sports sedan named 989 was developed as the successor to the 928, but the top management thought the expensive car was so risky - if it failed, the company would have got into bankruptcy. Therefore the 989 project was axed at the last minute although the development had nearly finished. That was the blackest days for Porsche. 

However, the decision seemed correct as the company chose to build a cheap and small roadster instead. That is today's Boxster (986). It shares one-third components with the all-new generation 911, thus saves considerable cost. Both cars were received well by the market right from the start. In addition to the softened Deutsch mark and the fall of Japanese car makers, Porsche became profitable again.