The COVID-crisis and the future of automotive production in Germany: early insights into response strategies by the government, industry, and labor

Abstract:

The ongoing COVID-crisis may significantly reshape the established model of domestic automotive production in Germany and affect the country’s position within transnational sectoral value chains. The demand-side disruptions caused by national lockdowns in Europe throughout the year 2020 – and now extending to 2021 – have put intense economic pressures on many German carmakers and suppliers. In addition, the new environmental regulations and the "green" stimulus package introduced by the EU in the context of the crisis will accelerate the region’s transition to electromobility. As an industrial location, Germany may be particularly affected by the transformation – owing, among others, to the country’s strong value-chain specialization in combustion-engine technologies. Against this background, the present paper reconstructs the emerging structural implications of the COVID-crisis for the automotive production in Germany by exploring the response strategies of automotive firms, public policy actors, and trade unions. Our empirical material indicates that organizational restructuring has already started taking place in the German automotive industry – including employment reductions, plant closures, and growing relocation pressures. At the same time, the transition to electromobility will create new jobs in the automotive industry in Germany. In this context, intense policy efforts have already been made to stimulate the development of new domestic technological capabilities. An important role in this process seem to play the legacies of consensus-oriented, "corporatist" industrial governance in Germany.

This presentation is part of two joint sessions based on the VW foundation supported research project "Strategic response to COVID-crisis in the automotive industry: comparing European and global approaches". The general goal of the project is to explore the emerging structural implications of the COVID-crisis for the global automotive industry by studying the long-term response strategies of automotive producers and national governments in different countries. In doing so, our analysis focuses on the production of passenger vehicles from the conceptual perspective of global production networks embedded in national and regional political economies. Regarding case selection, the project analyses the strategic reactions by firms and public actors from the following five key car-producing countries: Germany and France, as two European high-wage economies that are home to important multinational producers and host significant automotive production bases; Japan and the United States, as two other members of the traditional automotive "Triad" (in addition to the EU); and finally: China as probably the single most important newcomer within the global automotive sector, which is likely to strongly benefit from the new windows of opportunity created by the electrification and digitalization of the car.