VW needed a car below the Type 1 Beetle to compete with other sub-1000cc cars like the Citroën 2CV, Fiat 500. It had a front mounted 700cc flat twin, and used MacPherson strut front suspension, just a couple years after it had been invented, making this the first use of the technology in a FWD application.

In 1955, 10 years after the war, few people could afford a car.