The Wunderwagen: Volkswagenwerk of Wolfsburg, West Germany

All world automakers are now scrambling to grab a niche in the market for efficient, very high mileage compacts and subcompacts for the mid- to late 1980s, but Volkswagenwerk of Wolfsburg, West Germany, is quickly pulling ahead. Having largely phased out its venerable Beetle profile of the 1950s and 1960s for the engineering improvements and angular lines of the bestselling Rabbit in the 1970s, the company is now at work on the aerodynamically sleek silhouette of a new subcompact four-seater design that looks more like a Gucci slipper than a car.

Targeted for production some time between 1986 and 1990, the...

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