6. The German Industrial Model in Transition: Electromobility Challenges in the Automotive Sector

This analysis explores the implications of the transition toward the production of battery-electric vehicles (BEVs) for the future evolution of the “German model” in the automotive industry. Our main argument is that the ongoing BEV shift creates significant new adjustment pressures and leads to several incremental changes that may undermine key characteristics of the German “global quality production” strategy. First, it remains unclear to what extent German carmakers will manage to reproduce their earlier “premium” profit strategies within the BEV market—in particular, given the increasing price competition in the sector and the ability of several foreign companies (especially Chinese carmakers) to produce high-quality vehicles at lower costs. Second, the role of German production plants and workers within the emerging transnational BEV value chains remains uncertain. Given the high domestic production costs, growing international competition, and increasing policy pressures from abroad, establishing a strong BEV manufacturing base in Germany will largely depend on a timely and effective government support strategy. Third, also the significant dependence of German producers on distant foreign markets creates new kinds of challenges. In particular, maintaining a strong market position in China may require companies to reshape their global production networks and sacrifice the previous centralization of product development and innovation activities in Germany.