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The company owes its post-war existence largely to one man, British Army officer Major Ivan Hirst, REME. In April 1945, KdF-Stadt, and its heavily bombed factory were captured by the Americans, and subsequently handed over to the British, within whose occupation zone the town and factory fell. The factories were placed under the control of Oldham-born Hirst. At first, the plan was to use it for military vehicle maintenance, and possibly dismantled and shipped to Britain. Since it had been used for military production, and had been in Hirst's words a "political animal" rather than a commercial enterprise—technically making it liable for destruction under the terms of the Potsdam Agreement—the equipment was in time intended to be salvaged as war reparations. (Allied dismantling policy changed in late 1946 to mid 1947, although heavy industry continued to be dismantled until 1951.) Hirst painted one of the factory's cars green and demonstrated it to British Army headquarters. Short of light transport, in September 1945 the British Army was persuaded to place a vital order for 20,000. The first few hundred cars went to personnel from the occupying forces, and to the German Post Office.

Some British Service personnel were allowed to take their VW Beetles back to the United Kingdom when they were demobilised, and one of the very first Beetles brought back in that way (UK registration number JLT 420) is still owned by Peter Colborne-Baber, the son of the original proprietor of the UK's first official Volkswagen Importer, Colborne Garages of Ripley, Surrey.

In the Industrial plans for Germany, the rules for which industry Germany was to be allowed to retain in the post-war period were set out. German car production was set at a maximum of 10% of the 1936 car production numbers.

By 1946 the factory was producing 1,000 cars a month, a remarkable feat considering it was still in disrepair. Owing to roof and window damage, rain stopped production and new vehicles were bartered for steel required for more production.

The car and its town changed their Second World War-era names to "Volkswagen" and "Wolfsburg" respectively, and production was increasing. It was still unclear what was to become of the factory. It was offered to representatives from the American, Australian, British, and French motor industries. Famously, all rejected it. After an inspection of the plant, Sir William Rootes, head of the British Rootes Group, told Hirst the project would fail within two years, and that the car "is quite unattractive to the average motorcar buyer, is too ugly and too noisy … If you think you're going to build cars in this place, you're a bloody fool, young man".[citation needed] The official report said "To build the car commercially would be a completely uneconomic enterprise". In an ironic twist of fate, Volkswagen would manufacture a locally built version of Rootes's Hillman Avenger in Argentina in the 1980s, long after Rootes had gone bankrupt at the hands of Chrysler in 1978—the Beetle outliving the Avenger by over 30 years.

Ford representatives were equally critical. In March 1948, the British offered the Volkswagen company to Ford, for free. Henry Ford II, the son of Edsel Ford, traveled to West Germany for discussions. Heinz Nordhoff was also present, and Ernest Breech, chairman of the board for Ford Motor Company. Henry Ford II looked to Ernest Breech for his opinion, and Breech said "Mr. Ford, I don't think what we're being offered here is worth a damn!" Ford passed on the offer, leaving Volkswagen to rebuild itself under Nordhoff's leadership.

In France, Citroën started the 2CV on a similar marketing concept. Meanwhile, in Italy, the Fiat 500 "Topolino" was developed.