BMW was established as a business entity following a restructuring of the Rapp Motorenwerke aircraft manufacturing firm in 1917. After the end of World War I in 1918, BMW was forced to cease aircraft-engine production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production as the restrictions of the treaty started to be lifted in 1923, followed by automobiles in 1928–29.
The first car which BMW successfully produced and the car which launched BMW on the road to automobile production was the Dixi, based on the Austin 7 and licensed from the Austin Motor Company in Birmingham, England.
BMW’s first significant aircraft engine, and commercial product of any sort, was the BMW IIIa inline-six liquid-cooled engine of 1918, known for good fuel economy and high-altitude performance. With German rearmament in the 1930s, the company again began producing aircraft engines for the Luftwaffe. The factory in Munich made ample use of forced labour: foreign civilians, prisoners of war and inmates of the concentrationcamp Dachau . Among its successful World War II engine designs were the BMW 132 and BMW 801 air-cooled radial engines, and the pioneering BMW 003 axial-flow turbojet, which powered the tiny, 1944–1945–era jet-powered “emergency fighter”, the Heinkel He 162 Spatz. The BMW 003 jet engine was first tested as a prime powerplant in the first prototype of theMesserschmitt Me 262, the Me 262 V1, but in 1942 tests the BMW prototype engines failed on takeoff with only the standby Junkers Jumo 210 nose-mounted piston engine powering it to a safe landing. The few Me 262 A-1b test examples built used the more developed version of the 003 jet, recording an official top speed of 800 km/h (497 mph). The first-ever four-engine jet aircraft ever flown were the sixth and eighth prototypes of the Arado Ar 234 jet reconnaissance-bomber, which used BMW 003 jets for power.