The factory was founded in 1951, and was known as LARZ and then LuMZ (Mechanical Factories of Lutz) from 1955. Along with truck repairs, the early products of this relatively small plant were mobile repair shop and refrigerated truck bodies on Moskvitch, ZIL, and UAZ frames.
Its first original design is the sturdy and simple LuAZ-967off-road vehicle for the Red Army. It originated after the Korean War, when the Soviets saw a need for small off-road vehicles comparable to the American Jeep, to supplement the overly-large and -heavy GAZ-69s then in service. Developed at NAMI (the National Automobile Institute), the prototype, known as NAMI 049, was completed in 1958.
LuAZ's civlian products suffered such a reputation for poor quality, "for a time the LuAZ was the only car that could be bought off the shelf by Soviet motorists".
At the moment,[when?] the company is on the verge of bankruptcy, holding together by assembling cars produced by VAZ.
A major expansion program is planned, which will see construction of a new car manufacturing facility in Cherkasy including a new paint shop, with planned annual assembly of around 60,000 Lada's and 60,000 Hyundai's and Kia's from 2007. Passenger car production will be transferred from Luts'k to Cherkasy, while bus production will move to Luts'k.
From the period of 1984 through 2002, 67 people were killed by faulty exhaust systems. Apparently, toxic carbon monoxide entered the cabin via the ventilation vents and asphyxiated the occupants.
LuAZ vehicles have been notorious for poor crash test ratings. Consequently, countless people have been ejected from these vehicles in accidents. Seatbelts did not become optional until the 2006 model year.