Both the engine and body work of the cars were designed wholly by Frederick with the help of his brothers, George H. Lanchester who was in charge of production with Frank Lanchester later taking charge of the business side. The Lanchester Engine Company was formed in December 1899 although a production model was well in advance at this stage. The factory was situated at Armourer Mills, Sparbrook, Birmingham. The first car was unorthodox in almost every detail, and many of the ideas both in production methods and design methods, have become accepted practice of the auto industry.
The vibration of the average car of 1900 can hardly be visualised. Lamps, mudguards, control levers, indeed the whole machine, shook and trembled like a jelly on springs . Single and twin vertical cylinder-engined cars were the worst offenders, but all vibrated to some extent, and one of the chief features of Lanchester's car was the "vibrationless" engine which was patented in 1895 and 1896 after re-designing it.
It was said at the time that the whole machine was much too complicated and would prove enormously troublesome. In fact the car was outstandingly reliable and free from the then prevalent valve and ignition troubles. Despite the brilliant design of the Lanchester twin its commercial success was limited for various reasons. Firstly, it was too late in appearing. By the end of 1901 motor salesman were claiming the Panhard et Levassor system as the only possible method of building a motor car and the efforts of engineers were concentrated on improving a design admittedly bristling with makeshifts. Had Lanchester been able to offer his 1901 design in, say 1898, its influence would probably have been greater. The second factor was financial. The Lanchester Company was under-capitalised, and had a struggle to make ends meet and therefore could not spend enough money on publicity.
To give an example of prices in 1904, the 10hp was £500, 12hp £550, 16hp £660, and 18hp £720 and these prices were for the complete car including tools and a selection of spares. By comparison the 18hp Daimler was £700 for the chassis only.
In producing the first car that was scientifically designed as a complete entity, Lanchester adopted much the same approach as John Harrison had brought, in the eighteenth century, to the task of making the first marine chronometer. In each case it was many years before the beautiful ingenuity of their work was fully appreciated.
To Dr. Lanchester the motor-car was merely a stepping stone in his research into the theory of aerodynamics, in which sphere he became an acknowledged authority. After 1905, design work on the cars became increasingly the responsibility of George Lanchester, whilst his brother devoted more time to experimental work.
Amongst other activities, he became a consulting engineer to the Daimler Company, when they adopted the Lanchester type worm gearing instead of the previous chain drive.
In 1904, despite a full order book, the business ran out of money and The Lanchester Engine Company Limited was put into voluntary liquidation. After a period of management by a receiver the business was re-organised, re-capitalised and incorporated as The Lanchester Motor Company Limited later that year.
Within weeks their bank called in the company's overdraft of £38,000 forcing immediate liquidation of the company's assets. Because their current premises had once been a part of BSA's Armourer Mills at Sparkbrook, a sale to BSA made sense. Thomas Hamilton Barnsley (1867–1930), the principal shareholder, chairman and managing director negotiated a sale of the whole share capital to BSA group shortly before his death on Christmas Day 1930. BSA's purchase of the whole of the shares was completed in January 1931 for £26,000, a fraction of the value of the assets. Car production was transferred to Lanchester's new sister subsidiary, Daimler, at Motor Mills, Sandy Lane, Radford.