MG Stands for Morris Garages, which was the Oxford distributor for Morris cars; co-incidentally, it was also owned by William Morris, later Lord Nuffield. When Cecil Kimber became its general manager in 1922, the firm started modifying standard Morris Cowleys, lowering the chassis and fitting more sporting bodywork.
By 1924, Morris Garages was advertising the "MG Special four-seater Sports", and had incorporated the famous octagonal badge into the copy. Old Number One was the first MG sports car, but it was the 48th body built for Morris Garages by one firm, Carbodies, since 1924.
Morris Garages outgrew its home three times before moving to Abingdon in 1929, by which time it had been renamed the MG Car Company. During the early 1930s, MG became synonymous with the term "sports car", and its road cars were promoted by successful racing forays. Then, for fiscal reasons, Morris sold his private companies, including MG, to Morris Motors in 1935.
Purists argue that MG was never the same again. There was less variety in the products, racing activities were limited, and placing the MG badge on BMC saloons such as the Morris Oxford and 1300 would have been anathema to Kimber. Realists would point out that even after Kimber's death in 1945, fine, affordable sports cars such as the TC, MGA, Midget and MGB continued to be built, and it was only British Leyland's appalling management that sullied a great name in the 1970s.