Supporting Incumbent Business Model Adaptation - An Analysis of Policy Influence on German OEM´s Strategies in the Electric Vehicle Transition

Abstract

The automotive industry is undergoing a major transformation towards electric vehicles, forcing OEMs to reevaluate their business models. This poses a challenge, as not just the product contents are changing: incumbent firms are pressured to explore new technologies instead of exploiting their existing business model, also coined as the competency trap. Policymakers play a crucial role in this context, needing to balance supporting the resilience of existing industries while also pushing sustainable technologies forward. This paper explores the role of policymakers in influencing incumbent firms' decisions towards new business model adaptation strategies during technological transitions, focusing on the case of the German automotive sector. Using a qualitative case study approach, the analysis evaluates the international policy mix and assesses the impact of moderating factors on OEMs' transition willingness and capability. The results reveal varying degrees of policy influence, with some policymakers adopting an interventionist approach, while others are more market-driven. These strategies interact with the organizational capacities and value networks of multi-nationally embedded OEMs, leading to diverse business model adaptations. The study highlights the complex interplay between policy design and incumbents' business model adaptation, creating opportunities for government intervention to support OEMs' adaptation and align their strategies with climate goals.