Jørgen Skafte Rasmussen who had purchased Audiwerke AG in 1928 was concerned that the Audi Zwickau plant was badly underutilized because demand for the expensive luxury cars that Audi produced was still restricted by the economic contraction that had followed the 1929 Stock-market crashes.

Rasmussen avoided time as well as development and tooling costs for creating a new small four-stroke units from scratch by buying engines for the Type P from Peugeot, across the Rhine in France.

[3] Rasmussen seems to have hedged his bets when deciding how to use the spare capacity of his Spandau plant.

[4] At about the same time as he arranged to produce the new Peugeot-powered Audi Type P there, he also gave instructions for the development of a new front-wheel drive car to be derived from the company's innovative DKW Typ P. The result was the DKW F1, developed and to be produced at Zwickau, priced at approximately 2,000 Marks,[5] and first seen in public in February 1931 at the Berlin Motor Show.

Meanwhile the DKW F1 and its successors, introduced to fill unused capacity in what had been the Audi Zwickau plant, proved so popular that for the rest of the 1930s Audi's own cars had to be produced at Auto Union's nearby Horch plant.