Venerable Surahammars Bruk, known for high-quality steel, was Sweden's first and foremost supplier of railway wheels and axles. The company had gradually expanded its product range to include other rolling stock components such as buffers, coupling hooks, brake shoes and steel plate.

Peter Petersson, who became works manager in 1883, was an impulsive, visionary business executive with railway market experience. He made sure that the company expanded sales of its finished components. He also practised forward integration. In 1891 he persuaded his Board to approve the production of complete rolling stock, but since the central Swedish town of Surahammar had no railway at the time, carriage manufacturing would take place at a separate company in Södertälje, south of Stockholm.

Well into the first decade of the twentieth century, Vagnfabriksaktiebolaget i Södertelge (or Vagnfabriken) was growing and very profitable. The company had a small but increasing number of customers: Swedish StateRailways (SJ), Stockholms Spårvägar (Stockholm Tramways) and private railways. Customers specified their carriages in great detail. SJ supplied drawings and production specifications, such as the sixteen essential steps during surface treatment of the outer steel plate on passenger carriages. Customers generally used competitive bidding. All rolling stock was built to order. Rolling stock builders were a kind of contract workshop with no products of their own, a fact reflected in pricing. When rolling stock demand levelled off soon after 1900, surplus capacity arose. Competition stiffened and profit margins were squeezed. Vagnfabriken lost volume and margins. The company's first loss-making year was 1903.

Scania's first prototype in front of the factory gate in Malmö 1901.Vabis railway carriage ordered by Östra Sörmlands Järnväg. 1895-1902. Depressed prices led to expanded cartel activity. Even earlier, seven manufacturers had agreed to make identical tender offers on SJ goods wagons. In 1904 the cartel expanded to additional manufacturers and product categories. A complete price and tendering cartel covering goods and passenger carriages for both SJ and private railways was established. An unofficial joint office compiled tender inquiries and allocated orders.

Vagnfabriken was allotted about 150 carriages per year. Its losses temporarily turned into profits. But it collapsed completely in 1908. Vagnfabriken then pinned its hopes on a desperate venture into engine and carbuilding. In 1896, when Vagnfabriken was still making pots of money, the visionary Peter Petersson had engaged an engineer named Gustaf Erikson to design and manufacture engines and "engine-propelled carriages". This development work, which at first took place in Surahammar, seemed to yield quick results.

By spring 1897, the first completely Swedish-built car was born. But like its immediate successors, it had major defects. Both engine and car designs were unsatisfactory.

Only in 1902, when engine development had been moved to Södertälje, was Erikson able to design a usable petrol engine and gearbox, with two forward gears and one reverse. That same year a truck was built, and the following year a passenger car.

Then in March 1903, Vagnfabriken received its first order for a motor vehicle. Ystad-Eslöfs Järnväg AB ordered a rail inspection car with a one-cylinder 3.5 hp engine. Given stagnating rolling stock production, in 1907 the Board of Vagnfabriken decided to build a new engine and automotive factory despite a total lack of commercial success in the road vehicle market. The decision, made just before the rolling stock cartel collapsed, was one of Peter Petersson's last. He retired in April 1908 and died later the same year.

The catalogue published in 1908 to market Vabis vehicles was full of optimism. This optimism increased when a 3-tonne truck with a 20 hp engine received a gold medal at the Swedish Royal Automobile Club's 1909 international truck competition. Vagnfabriken's target was 50 trucks per year, but customers stayed away. In 1909, production was a mere five trucks and seven cars. This was a financial disaster.

Shareholder enthusiasm for Vagnfabriken in general, and vehicle production in particular, died with Petersson. His successor was entrusted with phasing out and, if possible, selling off the operations.