From Wikipedia:
Who designed the car is a matter of controversy. The official story is that it was designed by Ferdinand Porsche. But in the 1920s Joseph Ganz had already made a similar design for a car that was smaller and more affordable than existing models. Car manufacturers were not interested, but two motorcycle manufacturers were. Adler produced the Maikäfer and Standard the Superior, which it advertised as 'Der Deutsche Volkswagen' and was the cheapest four wheel car at the time. When the Nazis came to power, they tested the Superior and favorable reviews appeared in magazines. However, shortly after, the Nazis suddenly imprisoned Ganz for a while, fired him as chief editor of the magazine Motor-Kritik and confiscated his documents, after which he fled to Switzerland, never to return. The reason for this is probably that they found out he was a Jew. The Nazis then turned to Porsche, who produced a prototype of the Käfer that looked a lot like the Superior. Volkswagen says that Ganz wasn't the only one to have such a design and that the Käfer was not based on his.
More info:
http://www.ganz-volkswagen.org/home.htm
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