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. 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)