The German Automobile Production System Going European

Abstract

For several decades the automobile industry was a key sector in the German economy, substantially determining its rate of growth. More than 20 per cent of domestic value added stemmed from this and related sectors at the beginning of the 1990s. As will be verified many times in this chapter, the automobile production system historically has emerged as a national system which still matters today. This above all else justifies dealing with a particular ‘German’ case. This production system has been extremely successful during the 1980s both on domestic and foreign markets, compared to its European neighbours, mainly a result of qualitative rather than quantitative growth due to shifts into higher valued automobiles. In what follows, some of the factors determining the growth and international competitiveness of the German automobile production system will be considered. The chapter will use Porter’s (1990) diamond of international competitiveness as a starting point as it stresses the combined effects of different factors for its production and reproduction. These factors are: first, the challenging demand on the domestic market, both by number of customers as the German market by far is the largest in Europe and by clients’ preferences as customers were prepared to buy larger, better equipped and higher valued automobiles. Second, the long-term competition among five large independent firms in the automobile sector, mainly sustained by technical competences.