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The Peugeot 206 was created in the early 1990's with the replacement of the preceding 205 model. Peugeot changed their model under the idea that super mini cars were no longer profitable, therefore a change was in order. The Peugeot 206 did not immediately follow the 205 as the Peugeot 106, 306 and 309 models to capture different levels of sales from prospective customers. The Peugeot 106 was rivaling the Ford Fiesta and Volkswagen Polo with the 306 and 309 models taking the mid and top end sales from the discontinuation of the 205. Because of this, many Peugeot enthusiasts believe the 206 should have been named the 207. The 206, although created early was not released until 1998.

The Peugeot moniker indicates that the 206 immediately followed the 205, but this is not true as other models were released before the 206. The eventual successor, the 207, was finally launched n 2006, but Peugeot recently announced that the 206 will stay in production until the year 2010. The 206 is the best selling Peugeot of all time but the end of the model in the upcoming years will end the '06' generation of Peugeot cars in almost 20 years. The 206 was initially produced in France and England but production switched to Slovakia. The closure of the British plant matched with the closure of the Ryton plant, which Peugeot took over when Peugeot bought Chrysler's European division in 1979.

The Peugeot 306 replaced the 309. The 306 is very similar to the Citroen ZX, which was released to the public two years before the 306 model. Both cars used the same structure and floorplan. The 205 was styled after the Pininfarina styling and has been a better seller. In the 1974 oil crisis, Citroen went bankrupt and Peugeot took over Citroen. This led to the similarities and identical cars produced by both manufacturers.

The 306 Phase 1 came to the market in March of 1993 as a 3 and 5 door hatchback with three different models being offered. The five door was more of a station wagon and was dubbed the "sw" for station wagon. Although not nearly as stylish as the 205, the 306 offered many practical uses in the vehicle. The sw estate model was not a hatchback station wagon, but a sedan with luxurious European styling to accompany the Peugeot racing spirit.

The engines used in the Peugeot cars were offered both in a gasoline and a diesel model. The gasoline engines were four cylinder units, which gained their outstanding reputation from being the power plant in the ever popular Peugeot 205 model. The idea for the Peugeot engines was to have a fair trade off between performance and excellent fuel economy. Three larger capacity engines were available but were restricted to automatic and performance models.