The original company was established in 1937 with the express purpose of building aircraft for the Swedish Air Force. As World War II was ending, it was apparent that the company's market for military aircraft would decline and after considering other options, Saab decided to move into the passenger car market.

The company's first car, the Saab 92 was a streamlined steel-bodied two-door saloon with a two-cylinder two stroke engine driving the front wheels and with independent suspension all round. Three cylinders replaced two with the introduction of the Saab 93 in 1955, and, until the Saab 95 and 96 in 1966, which used a 60 degree V4 4 stroke engine made by Ford, the company was renowned for its two-stroke motors, which continued until emissions regulations ended production in 1973.

General Motors (GM) Corporation bought 50% of Saab Automobile in 1990 with an option to acquire the entire company within a decade. Losses continued however, and its Malmo plant was closed in 1991. The 'New Generation' Saab 900 using the same platform as the Opel Vectra was launched in 1993 and in 1995, Saab declared a profit for the first time since 1988. As a result of this improved position GM purchased the remaining shares in 2000, making Saab a wholly owned subsidiary.