In the insular luxury market, it’s still considered something of a miracle that Lexus was able to break through as quickly as it did. But when Lexus broke out in 1989, its three main competitors were Mercedes, BMW, and Jaguar. Audi, the third power in Germany’s Big Three was barely on the radar. Part of that was because it was left for dead after a massive PR scandal in America, but it was also because Audi as we know it is still a relative newcomer to the luxury market.
Mercedes can trace its lineage back to (arguably) the first gasoline-powered car ever, the companies that became BMW were building aircraft engines and motorcycles well before World War I, and while Audi can trace its roots back as far as 1910, its lineage isn’t so clear cut. After founder August Horch was kept from naming a car after himself (he had already founded and left an eponymous company), he named his second company Audi, or “to hear” in Latin (Horch means hear in German). Audi was acquired by DKW in 1928, and in 1932, was absorbed with its parent company, the original Horch brand, and Wanderer into Auto Union – hence the four rings logo Audi still uses today.
After World War II, Auto Union largely stuck to building small, front-wheel drive cars with two-stroke engines. In 1958, Mercedes-Benz acquired the company, but it proved to be unprofitable, and in 1964 it sold the company to Volkswagen. While the company was still officially called Auto Union, Volkswagen launched a new sedan called The Audi in 1965, making it the first car to wear the badge in nearly 30 years. In 1969, it was merged with the small but sophisticated NSU brand, becoming Audi NSU Auto Union AG.
But Volkswagen kept a relatively tight leash on Audi, even selling them as Audi-Volkswagens in some markets. Audi had developed the midsize 100 sedan in secret because its management were afraid the brand would be forced to sell badge-engineered Volkswagens. In fact, it was the opposite of what happened. Volkswagen and Audi did have a symbiotic relationship, but the parent company largely relied on the brand to build more conventional cars as it planned for a life after the Beetle, which it rebadged and sold for itself. So the Audi 80/Fox became the Volkswagen Passat, and the Audi 50 was rebadged as the first Volkswagen Polo. But while Audis had developed a reputation for being popular mid-market cars, they largely lacked excitement. So in 1977, Audi engineer Jörg Bensinger proposed that Audi begin work on a rally-minded halo car for the brand, a sentiment echoed by chief engineer (and later VW Auto Group chief) Ferdinand Piëch. Had Volkswagen said no, there’s a chance Audi wouldn’t be here today.
In the late 1960s, several European countries created a joint program calling for a light military vehicle that could be used by several different nations across the continent. Known as the Europa Jeep program, Volkswagen threw itself into the project, creating both the Type 181 (better known in the U.S. as The Thing), and later the Type 183, or Iltis. While the 181 shared much of its mechanicals with aging air-cooled Volkswagen models, the Iltis was incredibly advanced. Audi had been enlisted to design its powertrain and suspension, and its team developed an incredibly capable, compact, and reliable four-wheel drive system. During winter testing, Audi engineers found that the 1.7 liter Iltis and its powertrain could outperform any other vehicle in snow. If it could produce a sports car with this technology, it would be unlike anything the world had ever seen.
Until Audi’s four-wheel drive system, 4×4 technology was considered expensive, cumbersome, and decidedly agrarian. American automakers like Ford and Chevrolet hadn’t even offered four-wheel drive versions of their trucks from the factory until the late ’50s, and while Jeep’s Quadra-Trac system was becoming advanced, the market for 4×4 cars was very small. Still, Audi believed that its system was different, and it could build a world-class car without raking up massive development costs.
Largely based on the Audi 80 Coupe, Audi unveiled the Quattro at the 1980 Geneva Motor Show, and went on sale shortly thereafter. Originally powered by a 2.1 liter inline five that put out 197 horsepower and 210 pound-feet of torque, it would’ve been otherwise unremarkable if it weren’t for its remarkable four-wheel drive system, now modified with an ingeniously-packaged center differential. With power going to all four wheels, zero to 60 came in 7.1 seconds, and top speed was an impressive 143 miles per hour, rain or shine.
The Quattro became a bona-fide legend in 1981 when it was entered in the World Rally Championship, making it the first four-wheel drive car to do so. Audi dominated the sport in 1981, and when Group B regulations went into effect in 1982, it only did better, winning again in ’82 and ’84. The original Quattro racer benefitted from a turbocharger cranking out 300 horsepower, but by the time the no-holds-barred Group B era began, it was cranking out 350. From there, it would only get crazier.
In 1984, Audi took the already potent Quattro and transformed it into one of the most formidable performance cars the world had ever seen. Known as the Sport Quattro, Audi shortened the wheelbase by a foot, added an carbon-kevlar body, and tuned the engine to produce over 300 in stock trim, and nearly 450 in competition. The following year, just before Group B came to a screeching halt, Audi introduced the S2 version, with a redesigned body kit and retuned engine. Official power output was around 475 ponies, but it was a very open secret that it was actually putting over 500. Zero to 60 came in about three seconds regardless of what you were driving on.
The rally success of the Quattro was an instant boon for Audi. As its lineup evolved into streamlined, tech-laden sedans that could finally begin to compete with BMW and Mercedes, the Quattro’s legend loomed large enough where it projected performance pedigree on anything with four rings on its grille.
Even in production trim, the automotive press was blown away. In June 1982, Motor Trend said:
Conventional automotive superlatives simply don’t do justice to Audi’s ultracar. The Quattro can run 0-60 mph in less than 8 secs and sail through most corners at twice the suggested max without half trying. And it tops it all off by being able to make the very best out of the worst possible road conditions. Did we mention that it also carries an EPA rating of 18 city/28 highway?
As great as it was, its $35,000 base price (about $85,000 today) put it at a $10,000 premium over the Porsche 911, meaning the Quattro stayed firmly in the performance car stratosphere. Just 11,000 cars were built before production ended in 1991; just 664 of those came to the U.S., and 220 of them were short-wheelbase Quattro Sports.
But by 1991, Quattro became lower case, and was available across Audi’s entire lineup. The groundbreaking four-wheel drive system had become part of Audi’s legend, and it was fast becoming a worldwide player in premium markets. The Quattro’s successor, the S2, largely picked up where its predecessor wore off, now providing a serious alternative to the BMW M3 – albeit in Europe only.
An era-defining rounded styling language came to the Audi lineup for 1995, all but erasing its sales problems in the U.S. market, and finally establishing it as the third equal player in Germany’s premium auto industry. Today, the Ur-Quattro is known as the most important model in Audi history, both by fans and by the brand itself. The Audi name may have been around for 106 years, but the brand as we know it was born just 36 years ago and raised in some of the most punishing terrain in the world.