Eastern Germany’s New Growth Engine
Eastern Germany has suffered from three decades of deindustrialization since the collapse of communism, largely because of poor policy decisions. But by becoming an electric-vehicle powerhouse, the region can help to drive Europe's green transition and secure its own future prosperity.
MUNICH – This week, Germany celebrates the 30th anniversary of its reunification. After years of frustration and gloom, the long-depressed east of the country – the former German Democratic Republic (DDR) – is finally experiencing fresh hope owing, to large new investments in electric-vehicle (EV) manufacturing.
Eastern Germany is fast becoming the European center of future electric mobility. Volkswagen is producing its ID.3 electric car in Zwickau and Dresden. BMW already manufactures its i3 electric car in Leipzig, while the Chinese firm CATL will produce EV battery cells for BMW at a factory near Erfurt in Thuringia. Another Chinese company, Farasis Energy, will make EV battery cells for Mercedes-Benz in the state of Saxony-Anhalt. In addition, Tesla last year announced plans to manufacture electric cars and batteries at a new “gigafactory” in Brandenburg, close to Berlin.
Why are all these firms coming to eastern Germany – and why now? The region’s high wages, especially relative to those in Eastern Europe, had long made it an unattractive investment location. But two recent policy announcements have changed the dynamic.