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Daimler Benz was awarded a contract to develop a 20-ton replacement for the Panzer III. Unlike the Z.W. 40, the VK 20.01(III) was a complete departure from previous designs.
Considerable further work was required for the definitive two-shaft SM-5 engine, which was meant to generate 14.7 kN (3,300 lbf) thrust. The prototype was completed in 1952 and, fitted with four SM-1 engines, flew briefly during a taxi test on 8 April 1952 but development of the engine and the N-20 aircraft was cancelled soon afterwards.