Though extremely successful in the 1960s, the Beetle was faced with stiff competition from more modern designs. The Japanese had refined rear-wheel-drive, water-cooled, front-engine small cars to where they sold well in the North American market, and Americans introduced their own similarly sized rear-wheel-drive Ford Pinto, Chevrolet Vega, and AMC Gremlin in the 1970s. The superminis in Europe adopted even more efficient transverse-engine front-wheel-drive layouts, and sales began dropping off in the mid 1970s. There had been several unsuccessful attempts to replace the Beetle throughout the 1960s; the Type 3, Type 4, and the NSU-based K70 were all failures. The over-reliance on the Beetle meant that Volkswagen was in financial crisis by 1974. It needed German government funding to produce the Beetle’s replacement. Only when production lines at Wolfsburg switched to the new watercooled, front-engined, front-wheel drive Golf designed by Giorgetto Giugiaro in 1974, (sold in North America as the “Rabbit”) did Volkswagen produce a car as successful as the Beetle. The Golf would be periodically redesigned over its lifetime with only a few components carried over between models, while the Beetle used only minor refinements of its original design.
The Golf did not kill Beetle production, which continued in smaller numbers at other German factories until January 19, 1978, when mainstream production shifted to Brazil and Mexico, markets where low operating cost was more important. The last Beetle was produced in Puebla, Mexico, in mid-2003. The final batch of 3,000 Beetles were sold as 2004 models and badged as the Última Edición, with whitewall tires, a host of previously-discontinued chrome trim, and the choice of two special paint colors taken from the New Beetle. Production in Brazil ended in 1986, then restarted in 1993 and continued until 1996. Volkswagen sold Beetle sedans in the United States until August 1977 (the Beetle convertible a.k.a. Cabriolet was sold until January 1980) and in Europe until 1985, with private companies continuing to import cars produced in Mexico even after production of the beetle had ended.
The Beetle outlasted most other automobiles which had copied the rear air-cooled engine layout such as those by Subaru, Fiat, Renault, General Motors and Tatra’s limousines, which ended production in 1999. Porsche’s sport coupes which were originally based on Volkswagen parts and platforms continue to use the classic rear engine layout (but water-cooled and moved forwards) in the Porsche 911 series, which remains competitive in the 2000s.