On November 14, 1899, August Horch (1868–1951) established the company A. Horch & Cie. in the Ehrenfeld district of Cologne, but because of dispute between him and the supervisory board, he had to leave the company. A few years later, he established a second company, Horch Automobil-Werke GmbH. The company traces its origins back to 1909 and August Horch. The first Audi automobile, the Audi Type A 10/22 hp (16 kW) Sport-Phaeton, was produced in 1910 in Zwickau.
In 1909, Horch was forced out of the company he had founded. He then started a new company in Zwickau and continued using the Horch brand. His former partners sued him for trademark infringement, and the German Supreme Court (Reichsgericht in Berlin) finally determined that the Horch brand belonged to his former company.
August Horch was barred from using his own family name in his new car business, so he called a meeting with his best business friends, Paul and Franz Fikentscher from Zwickau. At the apartment of Franz Fikentscher, they discussed how to come up with a new name for the company. During this meeting, Franz's son was quietly studying Latin in a corner of the room. Several times he looked like he was on the verge of saying something but would just swallow his words and continue working, until he finally blurted out, "Father – audiatur et altera pars... wouldn't it be a good idea to call it audi instead of horch?" "Horch!" in German means "Hark!" or "hear", which is "Audi" in Latin. The idea was enthusiastically accepted by everyone attending the meeting. The first Audi car, the Type B, 10/28PS was delivered early in 1910.
Audi started with a 2612 cc inline-four engine model followed by a 3564 cc model, as well as 4680 cc and 5720 cc models. These cars were successful even in sporting events. The first six cylinder model, 4655 cc appeared in 1924.
August Horch left the Audi company in 1920 for a high position at the ministry of transport, but he was still involved with Audi as a member of the board of trustees. In September 1921, Audi became the first German car manufacturer to present a production car, the Audi Type K, with left-handed drive. Left-hand drive spread and established dominance during the 1920s because it provided a better view of oncoming traffic, making overtaking safer.
Auto Union era
In August 1928 Jørgen Rasmussen, the owner of Dampf-Kraft-Wagen (DKW), acquired the majority of shares in Audiwerke AG. In the same year, Rasmussen bought the remains of the U.S. automobile manufacturer Rickenbacker, including the manufacturing equipment for eight cylinder engines. These engines were used in Audi Zwickau and Audi Dresden models that were launched in 1929. At the same time, six-cylinder and four-cylinder (licensed from Peugeot) models were manufactured. Audi cars of that era were luxurious cars equipped with special bodywork.
In 1932, Audi merged with Horch, DKW, and Wanderer, to form Auto Union. It was during this period that the company offered the Audi Front that became the first European car to combine a six-cylinder engine with front-wheel drive. It used a powertrain shared with the Wanderer, but turned 180-degrees, so that the drive shaft faced the front.
Before World War II, Auto Union used the four interlinked rings that make up the Audi badge today, representing these four brands. This badge was used, however, only on Auto Union racing cars in that period while the member companies used their own names and emblems. The technological development became more and more concentrated and some Audi models were propelled by Horch or Wanderer built engines.
Reflecting the economic pressures of the time, Auto Union concentrated increasingly on smaller cars through the 1930s, so that by 1938 the company's DKW brand accounted for 17.9% of the German car market while Audi held only 0.1%.
Post-World War II
Like most German manufacturing, at the onset of World War II the Auto Union plants were retooled for military production, and were a target for allied bombing during the war, leaving them damaged.
Overrun by the Soviet Army in 1945, on the orders of the Soviet Union military administration the factories were dismantled as part of war reparations. Following this, the company's entire assets were expropriated without compensation. On 17 August 1948, Auto Union AG of Chemnitz was deleted from the commercial register. These actions had the effect of liquidating Germany's Auto Union AG. The remains of the Audi plant of Zwickau became the VEB (for "People Owned Enterprise") Automobilwerk Zwickau or AWZ (in English: Automobile Works Zwickau).
The former Audi factory in Zwickau restarted assembly of the pre-war-models in 1949. These DKW models were renamed to IFA F8 and IFA F9 and were similar to the West German versions. West and East German models were equipped with the traditional and renowned DKW two-stroke engines.
New Auto Union
A new West German headquartered Auto Union was launched in Ingolstadt, Bavaria with loans from the Bavarian state government and Marshall Plan aid. The reformed company was launched 3 September 1949 and continued DKW's tradition of producing front-wheel drive vehicles with two-stroke engines. This included production of a small but sturdy 125 cc motorcycle and a DKW delivery van, the DKW F 89 L at Ingolstadt. The Ingolstadt site was large, consisting of an extensive complex of formerly military buildings which was suitable for administration as well as vehicle warehousing and distribution, but at this stage there was at Ingolstadt no dedicated plant suitable for mass production of automobiles: for manufacturing the company's first post-war mass-market passenger car plant capacity in Düsseldorf was rented from Rheinmetall-Borsig. It was only ten years later, after the company had attracted an investor that funds became available for construction of major car plant at the Ingolstadt head office site.
In 1958 Daimler-Benz took an 87% holding in the Auto Union company, and this was increased to a 100% holding in 1959. However, small two-stroke cars were not the focus of the company's interests, and while the early 1960s saw major investment in new Mercedes models and in a state of the art factory for Auto Union's, the company's aging model range at this time did not benefit from the economic boom of the early 1960s to the same extent as competitor manufacturers such as Volkswagen and Opel. The decision to dispose of the Auto Union business was based on its lack of profitability. Ironically, by the time they sold the business it also included a large new factory and near production-ready modern four-stroke engine, which would enable the Auto Union business, under a new owner and with the benefit of a rediscovered name, Audi.
In 1964 Volkswagen acquired a 50% holding in the business, which included the new factory in Ingolstadt and the trademark rights of the Auto Union. Eighteen months later, Volkswagen bought complete control of Ingolstadt, and by 1966 were using the spare capacity of the Ingolstadt plant to assemble an additional 60,000 Volkswagen Beetles per year. Two-stroke engines became less popular during the 1960s as customers were more attracted to the smoother four-stroke engines. In September 1965, the DKW F102 was fitted with a four-stroke engine and a facelift for car's the front and rear. Volkswagen dumped the DKW brand because of its associations with two-stroke technology, and having classified the model internally as the F103, sold it simply as the "Audi." Later developments of the model were named for their horsepower ratings and sold as the Audi 60, 75, 80, and Super 90, selling until 1972.
In 1969, Auto Union merged with NSU, based in Neckarsulm, near Stuttgart. In the 1950s, NSU had been the world's largest manufacturer of motorcycles, but had moved on to produce small cars like the NSU Prinz, the TT and TTS versions of which are still popular as vintage race cars. NSU then focused on new rotary engines based on the ideas of Felix Wankel. In 1967, the new NSU Ro 80 was a car well ahead of its time in technical details such as aerodynamics, light weight, and safety. However, teething problems with the rotary engines put an end to the independence of NSU. The Neckarsulm plant is now used to produce the larger Audi models A6 and A8. The Neckarsulm factory is also home of the quattro GmbH, a subsidiary responsible for development and production of Audi high-performance models: the R8 and the "RS" model range.
The mid-sized car that NSU had been working on, the K70, was intended to slot between the rear-engined Prinz models and the futuristic NSU Ro 80. However, Volkswagen took the K70 for its own range, spelling the end of NSU as a separate brand.
Modern era
The new merged company was known as Audi NSU Auto Union AG, and saw the emergence of Audi as a separate brand for the first time since the pre-war era. Volkswagen introduced the Audi brand to the United States for the 1970 model year.
The first new car of this regime was the Audi 100 of 1968. This was soon joined by the Audi 80/Fox (which formed the basis for the 1973 Volkswagen Passat) in 1972 and the Audi 50 (later rebadged as the Volkswagen Polo) in 1974. The Audi 50 was a seminal design because it was the first incarnation of the Golf/Polo concept, one that led to a hugely successful world car.
The Audi image at this time was a conservative one, and so, a proposal from chassis engineer Jörg Bensinger was accepted to develop the four-wheel drive technology in Volkswagen's Iltis military vehicle for an Audi performance car and rally racing car. The performance car, introduced in 1980, was named the "Audi Quattro", a turbocharged coupé which was also the first German large-scale production vehicle to feature permanent all-wheel drive through a centre differential. Commonly referred to as the "Ur-Quattro" (the "Ur-" prefix is a German augmentative used, in this case, to mean "original" and is also applied to the first generation of Audi's S4 and S6 sport sedans, as in "UrS4" and "UrS6"), few of these vehicles were produced (all hand-built by a single team), but the model was a great success in rallying. Prominent wins proved the viability of all-wheel drive racecars, and the Audi name became associated with advances in automotive technology.
In 1985, with the Auto Union and NSU brands effectively dead, the company's official name was now shortened to simply Audi AG.
In 1986, as the Passat-based Audi 80 was beginning to develop a kind of "grandfather's car" image, the type 89 was introduced. This completely new development sold extremely well. However, its modern and dynamic exterior belied the low performance of its base engine, and its base package was quite spartan (even the passenger-side mirror was an option.) In 1987, Audi put forward a new and very elegant Audi 90, which had a much superior set of standard features. In the early 1990s, sales began to slump for the Audi 80 series, and some basic construction problems started to surface.
In the early part of the 21st century, Audi set forth on a German racetrack to claim and maintain several World Records, such as Top Speed Endurance. This effort was in-line with the company's heritage from the 1930s racing era Silver Arrows.
Sales fell after a series of recalls from 1982-1987 of Audi 5000 models associated with reported incidents of sudden unintended acceleration linked to six deaths and 700 accidents. At the time, NHTSA was investigating 50 car models from 20 manufacturers for sudden surges of power.
A 60 Minutes report aired 23 November 1986, featuring interviews with six people who had sued Audi after reporting unintended acceleration, showing an Audi 5000 ostensibly suffering a problem when the brake pedal was pushed. Subsequent investigation revealed that 60 Minutes had engineered the failure — fitting a canister of compressed air on the passenger-side floor, linked via a hose to a hole drilled into the transmission.
Audi contended, prior to findings by outside investigators, that the problems were caused by driver error, specifically pedal misapplication. Subsequently, the National Highway Traffic Safety Administration (NHTSA) concluded that the majority of unintended acceleration cases, including all the ones that prompted the 60 Minutes report, were caused by driver error such as confusion of pedals. CBS did not acknowledge the test results of involved government agencies, but did acknowledge the similar results of another study.
With the series of recall campaigns, Audi made several modifications; the first adjusted the distance between the brake and accelerator pedal on automatic-transmission models. Later repairs, of 250,000 cars dating back to 1978, added a device requiring the driver to press the brake pedal before shifting out of park. A legacy of the Audi 5000 and other reported cased of sudden unintended acceleration are intricate gear stick patterns and brake interlock mechanisms to prevent inadvertent shifting into forward or reverse.
Audi's U.S. sales, which had reached 74,061 in 1985, dropped to 12,283 in 1991 and remained level for three years. — with resale values falling dramatically. Audi subsequently offered increased warranty protection and renamed the affected models — with the 5000 becoming the 100 and 200 in 1989 — and only reached the same sales levels again by model year 2000.
A 2010 BusinessWeek article — outlining possible parallels between Audi's experience and 2009–2010 Toyota vehicle recalls — noted a class-action lawsuit filed in 1987 by about 7,500 Audi Audi 5000-model owners remains unsettled and is currently being contested in county court in Chicago after appeals at the Illinois state and U.S. federal levels.
Audi AG today
The largest shareholder of Audi AG is Volkswagen AG, which holds over 99 percent of the share capital. Volkswagen AG includes the consolidated accounts of Audi AG in its own consolidated financial statements. In recent years, the possibility of Audi being spun off or otherwise divested by Volkswagen has been mooted
From 2002 up to 2007, Audi headed the Audi Brand Group, the Volkswagen Group's automotive sub-division, consisted of Audi together with SEAT and Lamborghini, that was focused on more sporty values, with the marques' product vehicles and performance being under the higher responsibility of the Audi brand.
Audi's sales grew strongly in the 2000s, with deliveries to customers increasing from 653,000 in 2000 to 1,003,000 in 2008. The largest sales increases came from Eastern Europe (+19.3%), Africa (+17.2%) and the Middle East (+58.5%). China in particular has become a key market, representing 108,000 out of 705,000 cars delivered in the first three quarters of 2009. One factor for its popularity is China is that Audis have become the car of choice for purchase by the Chinese government for officials, and purchases by the government are responsible for 20% of its sales in China.
