[1] Production of the saloon/sedan on the Sochaux assembly lines was discontinued during the summer of 1979, while the "Break" (estate / station wagon) was manufactured until the spring of 1980.

Peugeot conceived the 304, noting a gap in the midsize car market in France, Italy and the rest of Western Europe, and used the smaller 204's midsection, to minimize development costs and maximize return.

The 304's main competitors on its home market came from Renault and Simca, with Citroën noticeably absent from this sector at the launch.

After the 204 had been discontinued, the 304 Break and Fourgonette also became available with a new 1127 cc petrol engine (XK5, modified in a similar manner to the XL5) to fit this opening at the lower end of the market.

The transverse-engine front-wheel-drive configuration conferred enhanced cabin space, although this was no longer such an unusual feature as it had been for the 204 back in 1965.

Since the 204 had an exceptionally spacious passenger cabin for its class, the 304 body used the central portion of the 204: engine and running gear components were mostly interchangeable between the two cars.

However, the 304 had a restyled front grille and headlights, designed consciously to emulate the 504 which had received a generally positive market reception.

More substantial differences occurred at the rear of the saloon, where overhang on the 304 was 13.5 cm (5.5 inches) longer than on the 204: this allowed for a larger boot/trunk.

Originally only offered as a sedan, the Break (station wagon) model appeared in September 1970 and largely completed the lineup.

The roof line of the saloon was discreetly squared off to give greater headroom for rear passengers: the window frames on the rear doors were modified correspondingly,[11] adding about and inch and a half to their rearmost upper edge and making them unique to the 304, while the car's front doors remained interchangeable with those on the 204.

From the start it found itself in a fight for market share with the Renault 12 also introduced at the 1969 motor show: after the launch in 1970 of the Citroën GS, competition intensified further.

Of these, approximately 36 percent were exported, mostly within Europe: during the 1970s Peugeot was one of several European manufacturers successfully learning to treat the entire EEC region as a single market.