"The electric vehicle (EV) transition portends wrenching change in Germany's export-dependent economy, with potentially severe job losses in core occupations in the automotive industry and a drastic restructuring of employment in and outside automotive supply chains. The EV transition is made even more challenging by the growing competition from Chinese (EV) producers, both in China and in the EU, and by de-globalization and renewed protectionism. The shift to EV production and the associated transformation and digitalisation of the car industry are raising existential questions and fears concerning the sustainability of Germany's macroeconomic ‘model' and the associated systems of social protection and industrial relations. Can the German economy, largely focused on mechanical engineering built around cars, reinvent itself for an increasingly digitalised, electrified and geopolitically fragmented world? This paper, Part One of a larger economic analysis of Germany's EV transition, identifies the macroeconomic constraints that will shape the EV transition in Germany's automotive industry in the next decades. Our focus is on the fiscal and monetary policy space, industrial policy, and industrial relations and social policies. We argue that the older German model of economic growth, based on a set of mutually reinforcing ‘beneficial constraints' (imposed by policies and institutions), no longer exists. Current macroeconomic policies do not support, but instead undermine, the EV transition and associated industrial transformation. German policy-making needs a fundamental reorientation toward creating space for public funding to stimulate domestic demand, provide adequate social protection, enable job mobility, build modern digital infrastructure, and deploy new technologies that are needed for the EV and larger green transition. In a separate paper (Part Two of our analysis), we examine the impacts of the EV transition on jobs, workers, industrial relations and firms in the German automotive industry."

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