Volkswagen was established in 1937 by the German Labour Front (German: Deutsche Arbeitsfront) as part of the Strength Through Joy (German: Kraft durch Freude) program in Berlin.[4] 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.[5] Also, in Czechoslovakia, the Hans Ledwinka-designed 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).[6]
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.[6] The "People's Car" would be available through a savings plan at 990 ℛ︁ℳ︁ (US$396 in 1938)—about the price of a small motorcycle (the average income being around 32 ℛ︁ℳ︁ a week).[9][10]
It soon became apparent that private industry could not turn out a car for only 990 ℛ︁ℳ︁. 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.[11] However, the project was not commercially viable, and only government support was able to keep it afloat.[12][Note 2] Due to the outbreak of war in 1939, none of the participants in the savings scheme ever received a car. In 1950, a lawsuit was issued that, after 12 years of trial, ultimately provided a credit of 12% off the list price of a new VW base model or 5-times less the value paid into the saving scheme.[13]
Prototypes of the car called the KdF-Wagen (from the German term Kraft durch Freude, meaning "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[14] for short, was established in Berlin by the Deutsche Arbeitsfront, the national labour organization of the Nazi Party. More than a year later, on 16 September 1938, it was renamed to Volkswagenwerk GmbH.[15][16]