Audi started with a 2612 cc (2.6 liter) four cylinder model followed by a 3564 cc (3.6 L) model, as well as 4680 cc (4.7 L) and 5720 cc (5.7L) models. These cars were successful even in sporting events. August Horch left the Audi company in 1920. The first six cylinder model, 4655 cc (4.7 L) appeared in 1924. In 1928, the company was acquired by Jørgen Rasmussen, owner of DKW, who bought the same year the remains of the US automobile manufacturer, Rickenbacker including the manufacturing equipment for eight cylinder engines. These engines were used in Audi Zwickau and Audi Dresden models that were launched in 1929. At the same time, six cylinder and four cylinder (licensed from Peugeot) models were manufactured. Audi cars of that era were luxurious cars equipped with special bodywork.

In 1932 Audi merged with Horch, DKW and Wanderer to form Auto Union. Before World War II, Auto Union used the four interlinked rings that make up the Audi badge today, representing these four brands. This badge was used, however, only on Auto Union racing cars in that period while the member companies used their own names and emblems. The technological development became more and more concentrated and some Audi models were propelled by Horch or Wanderer built engines. During World War II the Horch/Auto Union produced the Sd-Kfz 222 armored car, which was used in the German army during the war. It was powered by an 81 hp Horch/Auto Union V8 Engine which had a top speed of 50 miles per hour.

Another vehicle which was used in World War II to shuttle German military officials safely was known as the Kraftfahrzeug (KFZ 11) or the Horch Type 80. The military used it as a light transport vehicle.

The Audi emblem is four overlapping rings that represent the Auto Union. The Audi emblem symbolizes Audi amalgamation of Audi with DKW, Horch and Wanderer: the first ring represents Audi, the second represents DKW, third is Horch, and the fourth and last ring Wanderer.

Auto Union plants were heavily bombed and partly destroyed during World War II. After the war, Zwickau soon became part of the German Democratic Republic and the Auto Union AG got broken up and named VEB Automobilwerk Zwickau. The new Firm was launched in Ingolstadt still using the old name. Many employees of the destroyed factories in Zwickau came to Ingolstadt and restarted production of cars under the DKW label. These cars were equipped with two stroke engines. They based on a pre war construction and were also built in Zwickau in a very similar way.

In 1958 Daimler-Benz acquired 87 per cent of Auto Union and in the next year 100 per cent. In 1964 Volkswagen bought the factory in Ingolstadt and the brands of the Auto Union. The time of two stroke engines came to an end in the middle of the sixties. Customers were more attracted to the comfortable four stroke engines. In September 1965 the last DKW model, the DKW F102, got a four stroke engine implanted and some changes of front and rear. Volkswagen dumped the brand DKW because of its two stroke smell, "relaunching" the Audi brand. The model was classified internally as the F103 and sold as simply the "Audi" (the name being a model designation rather than the manufacturer, which was still officially Auto Union), but later came to be known as the Audi 72. Developments of the model were named for their horsepower ratings and sold as the Audi 60, 75, 80, and Super 90. These models sold until 1972.

In 1969, Auto Union merged with NSU, based in Neckarsulm near Stuttgart. In the 1950s NSU had been the world's largest manufacturer of motorcycles but had moved on to produce small cars like the NSU Prinz (the TT and TTS versions are still popular as vintage race cars). NSU then focused on new rotary engines according to the ideas of Felix Wankel. In 1967, the new NSU Ro 80 was a space-age car well ahead of its time in technical details such as aerodynamics, light weight, and safety, but teething problems with the rotary engines put an end to the independence of NSU. Today the Neckarsulm plant is used to produce the larger Audi models.

The mid-sized car that NSU had been working on, the K70, was intended to slot between the rear-engined Prinz models and the futuristic Ro 80. However, Volkswagen took the K70 for its own range, spelling the end of NSU as a separate brand.

The new merged company was known as "Audi NSU Auto Union AG", and saw the emergence of Audi as a separate brand for the first time since the pre-war era. Volkswagen introduced the Audi brand to the United States for the 1970 model year.

The first new car of this regime was the Audi 100 of 1968. This was soon joined by the Audi 80/Fox (which formed the basis for the 1973 Volkswagen Passat) in 1972 and the Audi 50 (later, rebadged as the Volkswagen Polo) in 1974.

The Audi image at this time was a conservative one, and so, a proposal from chassis engineer Jörg Bensinger was accepted to develop the four-wheel drive technology in Volkswagen's Iltis military vehicle for an Audi performance car and rally racing car. The performance car, introduced in 1980, was named the "quattro," a turbocharged coupé which was also the first German large-scale production vehicle to feature permanent all-wheel drive through a center differential (not counting the earlier British Jensen FF, produced in small numbers). Commonly referred to as the "Ur-Quattro" (the "Ur-" prefix is a German augmentative used, in this case, to mean "original" and is also applied to the first generation of Audi's S4 and S6 sport sedans, as in "UrS4" and "UrS6"), few of these vehicles were produced (all hand-built by a single team) but the model was a great success in rallying. Prominent wins proved the viability of all-wheel drive racecars, and the Audi name became associated with advances in automotive technology.

In 1985, with the Auto Union and NSU brands effectively dead, the company's official name was now shortened to simply "Audi AG".

In 1986, as the Passat-based Audi 80 was beginning to develop a kind of "grandfather's car" image, the type 89 was introduced. This completely new development sold extremely well. However, its modern and dynamic exterior belied the low performance of its base engine, and its base package was quite spartan (even the passenger-side mirror was an option.) In 1987, Audi put forward a new and very elegant Audi 90, which had a much superior set of standard features. In the early nineties, sales began to slump for the Audi 80 series, and some basic construction problems started to surface.

This decline in sales was not helped in the USA by a 60 Minutes report which purported to show that Audi automobiles suffered from "unintended acceleration". The 60 Minutes report was based on customer reports of acceleration when the brake pedal was pushed. Independent investigators concluded that this was most likely due to a close placement of the accelerator and brake pedals (unlike American cars), and the inability, when not paying attention, to distinguish between the two. (In race cars, when manually downshifting under heavy braking, the accelerator has to be used in order to match revs properly, so both pedals have to be close to each other to be operated by the right foot at once, toes on the brake, heel on the accelerator; a driving technique called heel-and-toe). This did not become an issue in Europe, possibly due to more widespread experience among European drivers with manual transmissions.

60 Minutes ignored this fact and rigged a car to perform in an uncontrolled manner. The report immediately crushed Audi sales, and Audi renamed the affected model (The 5000 became the 100/200 in 1989, as it was elsewhere). Audi had contemplated withdrawing from the American market until sales began to recover in the mid-1990s. The turning point for Audi was the sale of the new A4 in 1996, and with the release of the A4/6/8 series, which was developed together with VW and other sister brands (so called "platforms").

Currently, Audi's sales are growing strongly in Europe. 2004 marked the 11th straight increase in sales, selling 779,441 vehicles worldwide. Record figures were recorded from 21 out of about 50 major sales markets. The largest sales increases came from Eastern Europe (+19.3%), Africa (+17.2%) and the Middle East (+58.5%) [citation needed]. In March of 2005, Audi is building its first two dealerships in India following its high increase in sales in the region.
Audi has recently started offering a computerised control system for its cars called Multi Media Interface (MMI). This comes amid criticism of BMW's iDrive control, essentially a rotating control knob designed to control radio, satellite navigation, TV, heating and car controls with a screen. MMI has been widely reported to be an improvement on BMW's iDrive. (BMW has since made their iDrive more user friendly.)

MMI has been generally well-received, as it requires less menu-surfing with its mass of buttons around a central knob, with shortcuts to the radio or phone functions. The screen, either colour or monochrome, is mounted on the upright dashboard, and on the A6 and A8, the controls are mounted horizontally. However, an "MMI Like" system is also available on the Audi A3 and A4 models when equipped with the optional Navigation System.