On the 26 May 1938, Hitler ceremoniously laid the cornerstone of the new factory, a huge event witnessed by an estimated 70,000 people and 150 reporters, all controlled by the Nazi propaganda machine. It was here that Hitler declared that the model would be known as the 'KdF-Wagen' or 'Strength through joy' wagon and the surrounding town that was built to support the factory would be known as the 'KdF-Stadt', production was to start in September 1939 - this turned out to be the same month that World War Two was declared.

As the War gathered pace, the KdF-Wagen was put on hold and production changed to military vehicles. The 'Kubelwagen' used the tried and tested and very successful chassis and air-cooled engine developed for the peoples car. In 1942 the Kubelwagen was joined by the Schwimmwagen - a four wheel drive vehicle capable of driving on land and in water. By 1943 over 12,000 prisoners of war were working at the factory, which was by now mostly repairing aircraft.

For most of the war, the KdF plant had managed to escape heavy bombing, the new town was not on many allied maps. Near the end of the war the factory was used to manufacture the V1 rocket. This rocket was an unmanned aircraft, powered by an air-breathing pulsejet engine that had the ability to reach Britain from Germany, and the factory became a main target for the allied bombing raids. Several daylight bombing raids by the US left the factory in ruins.

After the war was over, the British Army took control over the factory. The British were interested in the factory, because they needed light transportation. The factory was placed under the control of Major Ivan Hirst. At the end of 1945, more than 2000 cars had been produced. Mainly produced from spare parts; that were left in the factory.

Within a year, the factory had produced over 10,000 cars, all thanks to assistance from the British government. Sometime after 1945, the company was named Volkswagen by the British, who also renamed the town at the factory "Wolfsburg", which was the name of a local castle.

The British sought to give control of the company to able hands: the Ford company turned the offer down because it thought it would be a waste of money, the French government refused; nobody seemed to want the company. In 1949, the British government was finally able to relinquish control of the company to the German government. Heinrich Nordhoff was appointed as the senior executive of Volkswagen, a move which proved to be a very good one.