Today, Volkswagen is the largest automaker in Europe. However, it has not always been this way...
Literally, the word "volkswagen" means "people's car." In Germany, the idea of a people's car wasn't exactly a new one. Before the 1930's, there had been many efforts to create simple cars that everyone could afford, but none met with profound success. Almost all cars before 1930, even if they were designed to be simple enough for the average person, ended up costing more than the average worker's yearly wage.
Meanwhile, the year is 1930, and Ferdinand Porsche had just set up an automotive design company, which became known as the Porsche Büro. The company patented a sophisticated independent front suspension system, which consisted of transversely mounted torsion bars connected to two trailing arms on each side. At the time, this was lighter than most other common types of suspension. In 1931, a German motorcycle company, Zündapp, asked Porsche if he could design a suitable car for them. Porsche came up with a streamlined 2 door sedan, which had lines similar to the Beetle. It was designated the Type 12. Zündapp wanted to put in a 1.2 liter radial engine from one of their motorcycles...this was the end of the line for this design, as it didn't make it any further.
Porsche then designed a car for NSU in 1933 that was known as the Type 32. This car looked even more similar to the upcoming KdF Wagen than the Type 12 did. This car looked similar to the Tatra V570, and shared many mechanical similarities. After World War II, the Volkswagen company paid Tatra for compensation, since Tatra believed its technology and design was pirated in development of the KdF Wagen. Eventaully, NSU dropped the Type 32 project.

Adolf Hitler had a keen interest in cars even though he did not drive. In 1933, shortly after taking over as leader of Germany, he asked Ferdinand Porsche to make changes to his original 1931 design to make it more suited for the working man. Hans Ledwinka discussed his ideas with Ferdinand Porsche, who used many Tatra design features in the 1938 "KdF-Wagen", later known as the VW Käfer - or Volkswagen Beetle. On 22 June 1934, Dr. Ferdinand Porsche agreed to create the "People's Car" for Hitler.
Changes included better fuel efficiency, reliability, ease-of-use, and economically efficient repairs and parts. The intention was that ordinary Germans would buy the car by means of a savings scheme ("Fünf Mark die Woche musst Du sparen, willst Du im eigenen Wagen fahren" — "Save five Marks a week, if you want to drive your own car"), which around 336,000 people eventually paid into. Volkswagen honoured its savings agreements in West Germany (but not in East Germany) after World War II[citation needed]. Prototypes of the car called the "KdF-Wagen" (German: Kraft durch Freude -- "strength through joy"), appeared from 1936 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 programmes 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 Nazi Germany; the "Volksempfänger" radio receiver for instance. On 28 May 1937, the Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH was established by the Deutsche Arbeitsfront. It was later renamed "Volkswagenwerk GmbH" on 16 September 1938. [8]

VW Type 83
Erwin Komenda, the longstanding Auto Union chief designer, developed the car body of the prototype, which was recognizably the Beetle we know today. It was one of the first to be evolved with the aid of a wind tunnel; unlike the Chrysler Airflow, it would be a success.
The building of the new factory started 26 May 1938 in the new town of KdF-Stadt, now called Wolfsburg, which had been purposely built for the factory workers. This factory only produced a handful of cars by the time war started in 1939. None were actually delivered to holders of the completed saving stamp books, though one Type 1 Cabriolet was presented to Hitler on 20 April 1938 (his 49th birthday).
War meant production changed to military vehicles, the Type 81 Kübelwagen ("Bucket car") utility vehicle (VW's most common wartime model), and the amphibious Schwimmwagen which were used to equip the German forces.