The S4 competed in the World Rally Championship in 1985 and 1986, until Group B class was disbanded and the cars were eventually banned from competition completely by European sanctioning body FIA. The car replaced, and was an evolution, of the 037. The S4 took full advantage of the Group B regulations, and featured a midship-mounted engine and all-wheel drive for superior traction on loose surfaces.
The car’s 1.8 litres Inline-four engine combined supercharging and turbocharging to reduce turbo lag at low engine speeds. The engine generated a maximum output of 483 hp, but some sources even claim that the engine was capable of generating more. In 1985, when Lancia engineers tested an S4 engine under extreme conditions, it developed around 1.000 hp, with 5 bars of boost pressure. The choice of a 1.759 cc engine put the S4 in the under 2.500 cc class, which allowed a minimum weight of 890 kg. The combined super/turbocharger system was a development of the 037 engine that generated 325 hp with a one supercharger only.