1945–1951: Post-war rebuilding

In East Germany, the BMW factories at Eisenach-Dürrerhof, Wandlitz-Basdorf and Zühlsdorf) were seized by the Soviet Union. The factory at Eisenach was taken over by the Soviet Awtowelo Company and resumed production of the BMW 321 in 1945, just after motorcycle production also resumed. A mildly revised BMW 327 entered production in 1948, followed by the BMW 340 in 1949. These were sold under the BMW name with the BMW logo affixed to them. To protect its trademarks, BMW AG legally severed its Eisenach branch from the company. The Soviet Awtowelo Company continued production of the 327 and 340 under the Eisenacher Motorenwerk (EMW) brand with a red and white version of the logo until 1955.

In West Germany, many of the BMW factories had been heavily bombed during the war. By the end of the war, the Munich plant was completely destroyed. BMW was banned by the Allies from producing motorcycles or automobiles. During this ban, BMW used basic secondhand and salvaged equipment to make pots and pans, later expanding to other kitchen supplies and bicycles.

In 1948, BMW was still barred from producing automobiles, however, the Bristol Aeroplane Company (BAC) inspected the factory, and returned to Britain with plans for the 327 model and the six-cylinder engine as official war reparations. Bristol then employed BMW engineer Fritz Fiedler to lead their engine development team. In 1947, the newly formed Bristol Cars released their 400 coupé, a lengthened version of the BMW 327. that featured BMW's double-kidney grille.

By the end of the 1940s BMW had returned to motorcycle manufacture but still had not restarted automobile manufacture. There were several approaches considered regarding how to re-enter the automotive market. Kurt Donath, technical director of BMW and general manager of the Milbertshofen factory, advocated to produce another manufacturer's old models under licence, also purchasing the tooling to produce the cars from the other manufacturer. Chief engineer Alfred Böning's preferred approach was a small economy car, and he developed the BMW 331 prototype, powered by a 600 cc (37 cu in) motorcycle engine. In the end, it was sales director Hanns Grewenig's proposal that was successful. Grewenig believed that BMW's small production capacity was best suited to luxury cars with high profit margins, similar to the cars BMW made just before the war. To this end, he had Böning and his team design the BMW 501 luxury sedan. The 501 was unveiled in 1951, however delays in receiving and setting up equipment caused production of the 501 to be delayed until late 1952.