Around the mid-to-late seventies FSO, with some assistance of specialists from FIAT, began working on their next model. The Polonez, a more modern automobile that utilized many components from the Fiat 125p, entered production in 1978 and its latest incarnation is still rolling off the assembly line today.

The Polonez featured a hatchback body that wasn't so bad for its day, had a roomier trunk and more comfort than the Fiat 125p, and its rear bench could be folded. The 4-cylinder engine, in either 1300cc or 1500cc form, powering the Polonez was a much modified and improved 125p unit, the transmission was a four speed. In 1987 arrived a better 87bhp power unit.

Throughout its production life the Polonez was continuously being upgraded and in 1991 the second generation, the Caro, arrived, with quite a few changes.

There are several different types of the Polonez Caro, including the recently introduced sedan Atu. Also available are the 1-ton pick-up, ambulance, road assistance, police, and cargo van versions.

The Polonez has also proven itself as a viable rallying vehicle, attaining good results in the country. In the eighties it also took part in World Constructor's Championship rallies.