GM's Harley Earl arguably developed the first concept car when he designed the Buick "Y-Job" in the late '30s in order to demonstrate the company's technical and aesthetic value. Between 1949 and 1958, however, GM's public concept program became synonymous with the emergent cultural growth and innovation of the American automobile industry. Based on this highly successful approach, competing manufacturers began to develop and offer their own design visions to the public.
In short, concept cars are about successful marketing, and marketing is based on attracting people to particular products regardless of the cost. As Earl pointed out at the time, "Beauty in cars depends on design, rather than on dollars." As a result, the concept car is really an active "trend/opinion mechanism." In this process, the public decides on what features or accessories they prefer, and an auto company typically responds and incorporates the more exciting or innovative design bits in succeeding models over time.
Th concept car process is based on a four-step approach. A company's design department initially develops various concepts on paper. If these elementary designs warrant further interest, the company moves on to the construction of small scale models where management screens various critical options, then selects its preferred versions. Once a model gets the green light, the designer is then free to build one or more full-scale versions in clay. And from there, successful final designs are constructed from hand and subsequently offered to the public at various major auto shows.
Once a show season is complete, some cars go to manufacturer museums or they can be used in succeeding years. For example, in the late 1990s, the Chrysler Crossfire concept car was used for three years before it became as a final production car. The unfortunately fact, however, is that most concept cars are broken down and the various parts end up at manufacturer warehouses where they are stored in perpetuity.
It is unlikely that the concept car will disappear any time soon, since the automobile marketing industry is based on delivering new products on an annual basis. For an example of the depth of interest in these vehicles, you only have to attend the New York L.A, Geneva, London or Frankfurt auto shows to get the idea.