By the late '60s, VW was in a legitimate full-on panic about replacing the Beetle: somehow, they never really managed to figure this out. The Beetle was just selling too well for too long to worry until it was almost too late. Eventually, the Golf saved the day, but there was a brief moment where it looked like VW's salvation would be much weirder.
After VW bought NSU and Audi in the late '60s, the much more conventional water-cooled, transverse front-engined Golf/Rabbit was derived from NSU/Audi designs and saved VW's bacon, as well as set the company's fundamental technical DNA to this day. But this was a sort of last-minute desperation plan. The goal of replacing the Beetle as VW's core product went back much further, and almost culminated in a surprisingly sophisticated and unusual car, the EA266 prototype.
The EA266 was developed with assistance from a Porsche team led by Ferdinand Piëch — the same one who would later become Chairman of the Volkswagen group. The EA266 was a very novel and innovative little car. It broke with VW's traditional tech in some of the same ways as the Golf would, using an inline, water-cooled engine, but unlike the Golf, which used the Mini and contemporary Fiats as templates for its design, the EA266 must have been looking at exotic sportscars, because it was mid-engined, with the drivetrain placed low and in the middle-rear of the car.
The 1588cc inline four was laid flat under the rear seat in a longitudinal configuration with the transaxle directly behind it. The cylinder head was on the left side of the car (facing forward), while the radiator, fan, and other various bits were to the right. The whole unit was sealed in its own little compartment under the rear seat, sort of prefiguring the way the Porsche Boxster/Cayman would tackle this issue in the future.
It's said the design was inspired by a 1961 Porsche 911 prototype, the Porsche 695, which was a sort of mid-engined proto-911, with room for four inside and the engine under the rear passengers' butts.
The engine made between 100-105 HP (reports vary). That was pretty damn good for the late 60s, when, for example, a Beetle was making about 53 HP, and most other small economy cars of the era weren't doing much better.
A VW museum description of the car lists the goals of the development project as
- maximum interior dimensions
- minimum interior dimensions
- economical purchase price and operation
- interior design maximizing operational comfort and convenience
I'm not exactly sure if the seemingly contradictory "maximum/minimum" interior dimensions thing was a joke or just confusing, but they sure as hell figured out a way to deliver on that one. Just look at this cutaway of the car:
If you're a space utilization fetishist like myself, your pants likely look like you're trouser-smuggling a model of a ziggurat right now. The entire length of the car is available for passenger and/or cargo use. Like the earlier VW Type III (or a modern Tesla Model S) there's two luggage areas for use. The difference here is that with the engine so low and flat under the rear seat, that rear cargo area is a deep, full-sized hatch, even in the non-wagon design of the car.
The protoype was a little bit bigger than the 1st-gen Golf that replaced it, but not by much. It has a bit of extra height to accommodate the engine without sacrificing interior room, but it's overall still a small car.
So, it looks like it would have been very competitive from an interior and cargo-space standpoint, and an inline engine is likely a good bit cheaper than VW's traditional flat engines (half the number of cylinder heads, you see). But what's really exciting to think about are the performance and handling possibilities of the design.
VW was even thinking a great deal about all the possibilities of the design, coming up with sketches of an eventual van, sport coupe, and roadster versions. This would have been a very different — and to my way of thinking, much more exciting — modern VW.
It's built like a tiny exotic sportscar — very low center of gravity, mid engine, surprisingly good power — this thing looks like it could have been a blast to drive. It's reported to have a top speed of about 118 MPH, which was genuinely fast, especially for an economy car of the era, and the handling characteristics were said to be excellent, with McPherson struts in front and a multi-link rear.
Who said they were excellent? Well, a few journalists at the time did get to drive one of the 50 prototypes built, and they seemed to have loved what they drove. In fact, they loved driving the EA266 so much more than the later Golf prototypes they drove that VW allegedly had journalists sign non-publication agreements about the EA266 after the project was nixed.
And that brings up the big question: why was the EA266 cancelled? It was very far along in development, just about ready for production, when it was completely and summarily killed by VW's new boss, fresh from VW Brasil, Rudolph Leiding. In fact, it was killed within three weeks of his taking office, and this was from a man who had always been a champion of novel VW-based variants like the Brasilia and the SP-2, both of which even had a front-end design named after him.