When the West German army (known locally as the bundeswehr) needed a Jeep-like vehicle after WWII, they rejected Ferry Porsche’s 356-engined type 597 and instead picked the DKW Munga. The 3-cylinder, two-stroke Munga entered production in 1956 and was phased out in 1968. During that time Volkswagen purchased what was left of Auto Union and owned the rights to the Munga.
The German army continued to use the Munga for several years after production ended but as they started to disappear from the fleet, it became evident that there was nothing available to replace them with. They hesitantly ordered Volkswagen 181s (better known as the Thing) but those had no real offroad capacity. In 1976 the army made a call for offers: they needed a vehicle that could transport four people, 500 kilos (about 1,100 pounds) and climb a 50° incline fully loaded. It had to be capable off-road but still be street-legal. It had to measure less than 4 meters (157 inches) long and 1.60 meters (63 inches) wide.
It’s with these and many other guidelines in mind that a team of ex-NSU workers led by a certain Ferdinand Piech mixed and matched Munga, Audi, mk1 Golf and Beetle parts to create the Volkswagen type 183, more commonly called the Iltis (ferret in German). The army approved the design in 1977 and placed an order of 8,800 cars. The first examples were delivered in late 1978.
The 183 was powered by a 1714cc water-cooled four-cylinder that came in two variants: there was a 70hp with lower compression (running on normal gas) or 75hp with higher compression (premium fuel only). A Solex 1B1 carburetor was in charge of fuel delivery.
The transmission was a 4-speed manual unit with a low gear indicated by a G on the shift lever (for gelände, terrain in German).
Under normal driving the 183 was rear wheel drive but there was a lever to engage the front axle and turn it into a 4x4. All 183s had a locking rear differential and some also had a locking front differential. Story has it that it’s this setup that inspired Audi engineers to begin working on the Quattro project.
Below, a Volkswagen 183 interior, heavily influenced by the Beetle:
Not just for war.
Volkswagen presented a civilian version of the 183 at the 1979 Geneva Auto show and sales began shortly after. Less than 1,000 of them were assembled before the plug was pulled. Several reasons have been pointed out for the 183’s failure on the European market: it’s not a terribly good-looking vehicle, it’s not a particularly comfortable vehicle, it’s too rustic, and so on. In reality the most valid reason for the 183’s lack of success was its price: in 1982 it cost about three times as much as a base-model Golf; it even cost more than a V8-powered Range Rover.
Perhaps in an effort to create publicity for the Iltis Volkswagen fielded four of them in the 1980 Paris-Dakar. The result was spectacular: #137 took first place, #136 took second place, #138 took fourth place and #139, a support vehicle, took ninth place. Patrick Zaniroli, pilot of the #136 car, said that aside from a different cam and a bigger carburetor his Iltis was 100% stock, an impressive feat considering how modified most Dakar cars were (and still are.)
When all was said and done 9,547 examples of the 183 were built, with the last one rolling off of Audi's Ingolstadt assembly line in 1982. That was just part one, though.
The Canadian connection.
In 1983 the Canadian government bought the rights and the tooling for the 183 and gave Bombardier the task of assembling them in their plant in Valcourt, Quebec. On the outside there were very minor differences between the Bombardier 183s and the VW 183s: the emblem on the steering wheel, the emblem on the grille and the taillights are among some of the most significant ones. 
2,500 Bombardiers went straight to the Canadian government to be used locally. Another 2,500 were purchased by Belgium in 1985. To save on shipping costs the ones earmarked for Belgium had their bodies shipped from Canada, their engines trucked from Germany and the whole lot assembled in Volkswagen’s Forest, Belgium plant. The exact number of 183s produced by Bombardier is unknown but it is estimated to be close to 6,000.
No civilian Bombardiers were built but the army sold them off when they were finished using them so a few are out there. The Bombardiers are generally considered to be of lesser quality than the VWs and are less desirable. Some companies in Canada even specialize in importing VW 183s from Germany while the Bombardier-branded ones sit on army surplus lots.
In 1985 production for the bundeswehr started back up in Ingolstadt but was sporadic at best. In 1987 the end was near and Volkswagen made a final modification to the 183: they equipped it with a 70hp 1588cc turbo diesel four-cylinder.
Production ended in December of 1988. The second round of German production yielded 1254 examples, bringing the total number of 183s built to about 16,000 units. In the bundeswehr they were progressively replaced by the Mercedes G-Wagen but much like its predecessor, the 183 stuck around for a while after production ended. It saw combat duty in 1991 in ex-Yugoslavia and Canada and Belgium still used them in their fleet in the early 2000s.
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As a side note, in the late 1970s France decided it was time to replace their aging fleet of Hotchkiss Jeeps and like Germany they called out for offers. No French company had a fitting vehicle on hand and designing one from the ground up would have been too expensive so they worked with the manufacturers that did have something to offer. Peugeot teamed up with Mercedes, put a 504 engine in the G-Wagen and called it the P4, Saviem put a Renault 20 engine in Fiat’s Campagnola and dubbed it the TRM500 and Citroen built the C44, a Volkswagen 183 powered by a CX engine. In the end the P4 was awarded the contract and the other two projects were scrapped but a team entered a C44 in the 1981 Paris-Dakar. It did not finish the race.
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