How will Germany adjust to the electrification of the car sector?

The current weakness of the German economy is also rooted in several adverse developments hitting the car sector. Most of these are likely to be temporary and there are first signs of a modest re- acceleration in activity in the car sector. That said, a significant remaining challenge for German car producers is how to cope with the transition from combustion engine to electric vehicles. The starting position, judging by the share of German car producers for hybrid and electric vehicles and patents related to electric cars , looks reasonably sound. However, a significant part of the value-added may be shifted out of the country in the transition , given the currently very limited production facilities for batteries in Germany . How significant the macro implications for Germany will be depend on a) how fast the share of electric vehicles will increase and b) to what extent p roduction capacities for batteries will be built. The government, via regulation on emissions and financial support, will in any case play an important role in managing the transition. Thus, the question how the German economy will cope with the electrification of the car sector is also a political one.