More from my link"
"The Heinkel He 100 story starts in 1933 with the Reichsluftsfahrtministerium (Reich Air Ministry, or RLM) competition to produce the first modern fighter for the re-forming Luftwaffe. Four designs were submitted; Arado's Ar 80, Focke–Wulf's Fw 159, Heinkel's He 112 and the Messerschmitt Bf 109. All four planes were tested competitively in early 1936 with interim engines, and the Ar 80 and Fw 159 were quickly eliminated. Both the 112 and 109 were considered worthy of further testing, and orders were sent out for 15 additional aircraft from both companies.
Although Heinkel was considered the favorite to win the contract, the more modern and better performing 109 won over the Flight Acceptance Commission. By late March of 1936 the 109 was considered the favorite. At that point Heinkel was allowed to redesign the 112, which resulted in the largely all–new 112B. The 112B was considerably improved and was as good or better than the 109, but the 109 won anyway.
The 112 had a few problems that lost it the competition. The first was that the airframe was rather complex; it included a large number of compound curves and its elliptical wing was labor intensive. The RLM was looking to produced hundreds of planes, so cost in both dollars and manhours was a factor. The prototypes also suffered from a series of accidents, even if they weren't related to problems with the plane they still left a bad taste in the mouth.
But the biggest problem for the 112 was that after learning that Supermarine had started series production of the Spitfire, the Luftwaffe was desperate to get a modern fighter into squadron hands. Heinkel might have won the competition had the B model been available in early 1936, but by the time they were ready in the second half of the year the 109 was already in series production.
Nevertheless some small scale contracts for the plane were finally secured with a variety of air forces in Europe and Japan. Thirty were bought by Japan, but twelve of these were used briefly by the Luftwaffe during the Sudetenland Crisis. Another nineteen were then sold to Spain where they served long careers. Thirty were sold to Romania, they served in combat in 1941 but were quickly worn out. Finally three more B's were sold to Hungary as the vanguard of a license production series that never took place.
By 1939 production of the He 112 ended, and it appeared that Heinkel was out of the fighter business."
It was a good plane, hands down a better performer than the 109 however the 109 was easier to mass produce so the 109 won the day. I also remember reading something about politics being involved too.