The range was originally launched in 1961 in two varieties: the Notchback with a notchback saloon body, and the Karmann Ghia 1500 (popularly known as the Type 34 Karmann Ghia) with an coupé body. The first Variant (popularly known as the Squareback) with an estate body followed in 1962 (VW still continues to name all its station wagon model variations Variant). The Fastback, a fastback coupé version, arrived in 1966. A convertible was announced with the original models, but did not enter production.
The Type 3 was introduced to diversify Volkswagen's product range beyond the Type 1 (Beetle), the Karmann Ghia, and the Type 2 (Bus). The Type 3 was designed to allow Volkswagen to make a more sophisticated car while maintaining much of the engineering from the Type 1. Though available to much of the world, the Type 3 line was not exported to the United States through Volkswagen of America until the 1966 model year, when the Squareback and Fastback were added to their line-up.
Originally a single- or dual-carburetted 1.5 L engine, (1500 N, 45 hp or 1500S, 54 hp) the Type 3 engine got a larger displacement (1.6l 1585 cc) for 1966 and modified for 1968 to include electronic fuel injection as an option, making it one of the first mass production consumer cars with such a feature (the first was the Type 4 VW 411). Also introduced for 1968 was a fully automatic transmission.
One notable advance from the Type 1 to the Type 3 was the front suspension — although similar to the Type 1, it was the first Volkswagen system to incorporate transverse torsion bars, as opposed to the Type 1's torsion leaves. The Type 3's torsion bars are cross-mounted, so that each individual torsion bar is connected to both front wheels, similar to the Dodge Aspen. The Type 3 often caused amusement to the uninitiated because its engine was hidden away under the rear trunk space in all three variants: the Notchback, Squareback and Fastback.
The Type 3 was also the world's first volume produced car to feature electronic fuel injection pioneered by Bosch. This was offered as the VW 1600E version (E meaning "Einspritzung" in German or injection).
The Type 3 also featured an air-conditioner, wall-to-wall carpeting, and a larger amount of storage space (front and rear storage - the motor was located under a panel in the rear boot, allowing for more luggage space than the Type 1 "Beetle")
Brazilian production :
The three box Type 3 was launched in Brazil in 1968 with unique styling (similar to the Brasilia) and four doors and was met with little success, being nicknamed Zé do Caixão (after a popular Brazilian movie character) for its boxy shape.
A fastback/hatchback version, the Volkswagen TL, fared somewhat better, being produced from 1970 to 1976, originally as a 2-door and later as a 4-door version.
Neither enjoyed as much success as its estate-bodied sibling, the Variant. The 3-door Variant was produced from 1969 to 1977 and then followed by an updated successor with squarer body, the Variant II which was produced from 1977 to 1980.
In 1980 Volkswagen bought the Argentinian Chrysler Ferve Argentina SAIC. With the takeover came a new name, Volkswagen Argentina SA, and the company inherited some Dodge / Chrysler vehicles. One of them was the Dodge 1500 (also the Dodge 1800) which the newly taken-over company re-badged as Volkswagen 1500 for the Argentinian market. The estate was known as the Volkswagen 1500 Rural. Both variants continued to be sold until 1988.
The car, which was based on Chrysler Avenger, had also been sold in Brazil, where it was known as the Dodge Polara — this version ceased in 1981, shortly after Volkswagen's purchase of the tooling in Argentina. Note also that this is the car which was available earlier in the 1970s in North America as the Plymouth Cricket.
These cars have no parts related to any other vehicles in the Volkswagen range, including the Volkswagen Type 3 known by the same Volkswagen 1500 name.
The placement of the engine under the rear trunk of the Type 3 was highlighted in a famous American television commercial for Volkswagen in the 1960's that shows a very young Dustin Hoffman showing the interior of the Fastback model and explaining the car's technical features. After showing the trunk up front, he opens the rear hood to reveal another trunk. Hoffman, looking befuddled as to the location of the engine, walks away, and the commercial closes with a title reading, "Your VW dealer will show you where the motor is."
The Type 3 appears in the 1996 Austrian TV police drama series, Stockinger as the clapped-out car that Ernst Stockinger drives when he arrives in Salzburg. The Australian SBS used images of Stockinger driving his white Type 3 Squareback in the city streets during the trailers that were run before the series commenced airing in Australia on 28 February 2008.