They are portrayed by Alexander Doré and Bernard Spear.
The spies are Vulgarian henchmen of Baron Bomburst. One is tall, thin and balding, while the other, chubby and has more hair than the other. They both have mustaches (with the Second Spy's resembling Adolf Hitler's). The First Spy is the more dominant of the pair, and is abusive towards his colleague and extremely arrogant, however he isn't as intelligent as he thinks he is. He has the codename "X." The Second Spy seems to have slightly more common sense than his friend, despite being the less intelligent of the pair. He is named Sherman. The First Spy says, "No, Sherman, that way!" at one point. For example, he seemed doubtful that Grandpa Potts was the Caractacus Potts they were looking for when the First Spy mistook him for his inventor son.
The pair are (to some extent) "masters of disguise," but while their disguises are (usually) good, their inability to lose their Germanic-sounding Vulgarian accents and their cluelessness about other countries' cultures means that no matter how they dress, they always stick out like sore thumbs. Fortunately, the characters surrounding them underestimate them or otherwise overlook them, allowing them to operate without being caught, not that this does them much good considering that they're inept and fail at almost everything they try.
They almost always dress identically except for when the First Spy wears Lord Scrumptious' clothes and the Second Spy wears the chauffeur's. This is the only time they dress differently, and they're the outfits they wear the longest.
They first appear aboard his ship after he first decides he wants Chitty, disguised as a pair of smokestacks. Wanting Chitty, Bomburst orders them to go ashore and get him the car, warning them that he'll kill them if they fail. Once ashore, the duo begin a campaign of repeated failed attempts to capture Chitty, culminating in their using an enormous wagon parked behind a painting inside of a tunnel (Wile E. Coyote style) to capture the car and Potts family. But it is instead the cantankerous Lord Scrumptious' luxury convertible that the spies capture, along with its owner and driver.
After being yelled at by Scrumptious, thinking there has simply been some mistake made, the First Spy decides to take Scrumptious' clothes and car, while the Second Spy wears the chauffeur's clothes and drives the vehicle. What they did with the two men is unknown. Arriving at the Potts farm, it is revealed that the First Spy's plan is that if they cannot obtain Chitty itself, they'll nab its inventor, and so he decides they'll kidnap Caractacus Potts. Upon arriving, they see his father and decide his behavior (such as dressing in full uniform and "going to Africa" by going and locking himself in a small shack) means he is an eccentric inventor.
Radioing Baron Bomburst, they report their success and then their boss arrives in a zeppelin. They climb aboard and the Vulgarians use a grappling line to lift up Grandpa's shack and fly away with it. Over the ocean, though, the shack weighs the airship down, and the villains all begin throwing items out in order to lighten the load. Eventually, though, Bomburst decides that the spies themselves are expendable and so has the zeppelin crewmen toss them into the ocean. This works, and the ship lifts up higher and continues on to Vulgaria. The spies, floundering in the water, swim back to Vulgaria. By the time they arrive, the film is almost over and revolution is happening in the little European nation. Wandering ashore, the spies witness Vulgarian soldiers being defeated by children, whereupon they turn around and run back into the sea. In the musical they seem to still work for the The Baron and Baroness but they seem to redeem at the end of the musical turning their back on them.