In 1884, Henry Royce entered a partnership with a friend of his and began a business manufacturing electric fittings. After several iterations, the company became Royce Ltd. in 1899. Ever the entrepreneur, however, Royce realized that the business in electric manufacturing had become too competitive and that a different product was needed to keep his company viable. Royce had always been fascinated by mechanical things, so he settled on the motor car as a potential new avenue for his business.
By 1902, Royce had bought two different cars and found them wanting. After deciding to build his own car, Royce spent the next two years experimenting and building. By 1904 he had built three cars. One of those was sold to a director of the company, a man named Henry Edmunds. Edmunds was friends with Charles Rolls, a businessman who ran a car showroom in London selling imports. Edmunds showed the Royce-built car to Rolls and subsequently arranged for the two to meet, a meeting that occurred in May 1904.
Impressed by the 2-cylinder Royce car, Rolls agreed to take all the cars that Royce could produce. The first Rolls-Royce car, a 10-hp, was shown at the Paris Salon in December 1904. The quality of the early Rolls-Royce automobiles led to a rapid increase in popularity, and on 15 March 1906 the two men formed Rolls-Royce Limited. The company charter contained a presciently forward-looking statement that the company should produce engines for use “on land or water or in the air.”
After raising £100,000 of capital by selling public shares in the new company, Royce began development of an all-new model. After the company moved to a new factory in Derby, all focus was placed on producing and marketing the six-cylinder Rolls-Royce 40/50 Silver Ghost. Thanks to Royce’s exacting standards, the Silver Ghost quickly established the reputation of Rolls-Royce Limited as a top-class automobile manufacturer.