German Production: The Economic and Sustainable Performance of Electric Trains
According to The Seven Secrets of Germany by David Audretsch and Erik Lehmann, Germany was set up for economic success on two fronts: the autonomy of German localities protected by the Grundgesetz (Basic Law) combined with Standortpolitik (the strategic management of place) and Germany’s rich and diverse set of research institutions, specifically the Fraunhofer Society. The Grundgesetz, approved in 1949, set Germany apart from other countries as it mandates decentralized fiscal authority to tax and fund local decision-making for each Bundesland, or state. Complementing the Grundgesetz, is Standortpolitik, the legal and constitutional mandate for every city, region, and state in Germany to implement strategies to sustain a strong economic performance, creating what is known as the entrepreneurial society. The Fraunhofer Society in Germany compromises sixty-seven institutes that focus on bridging the gap between research and manufacturing innovative products. In 2014, the budget for the entire Fraunhofer Society was $2.75 billion and was used to employ scientists and engineers. Germany’s decentralized political system coupled with investment in knowledge via innovation research has strengthened its export-oriented manufacturing base. According to Audretsch and Lehmann, “Made in Germany” became a sign of solidity and workmanship.
Germany became a global export powerhouse. In July 2014, Germany had reached monthly record exports exceeding €10 billion, an 8.5 percent increase from the previous year. Establishing the identity as a major-league exporter reflects Germany’s globalization status that encompasses partnerships, foreign operations, and networks. Today, Germany is the third largest exporter in the world, with a total export value of $1.70 trillion, partly due to the renowned five German automakers: BMW, Mercedes, Porsche, Volkswagon, and Audi that account for 7.09% of German exports at a value of $121 billion. More broadly, Germany’s vehicle sector plays a large role in the global and German economy with a vehicle global market share of 16.08%. However, with such a significant market share, car companies believed the government depended on them, developing a sense of invincibility. This led to the Volkswagen scandal uncovered by the U.S. Environmental Protection Agency where diesel-fuelled cars had been manipulated so that emission controls only functioned during laboratory tests and not when they were on the market. Over a six-year period, eleven million vehicles had been sold on the global market, allowing nitrogen oxide emissions to exceed those permitted by U.S. regulators. Although electric vehicles are viewed as a solution to replace conventional cars that run on fossil fuels, it is important to note that as an individual consumer product, electric cars still have external costs. For example, an increase in demand for electric cars will result in an increase in mining for raw materials to make electric vehicle batteries. These materials include graphite, cobalt, lithium, manganese, and nickel. While the car industry is at the heart of the German economy, it has evidently threatened environmental and human health. For this reason, more attention should be allocated to an industry that demonstrates a vital role in sustainable development and innovation across urban and rural areas: electric trains.
Infrastructure such as highways, trains, and airports are considered to be a form of physical capital. According to the economic growth model of Robert Solow, such physical capital is the key to efficiency and productivity. In fact, infrastructure investments are systematically linked to efficiency gains and greater economic performance. Interestingly, infrastructure also contributes to economic performance through a more indirect and collaborative lens known as social capital. Social capital refers to the linkages, networks, and interactions among people, firms, and organizations that facilitate a high flow of knowledge, ideas, and best practices. Social capital can only exist with sufficient infrastructure that fosters social interactions. This connectivity of individuals facilitates creativity, cultural empathy, and entrepreneurship. In fact, academic research has positively associated German infrastructure with entrepreneurial activity such as the creation of start-ups. A fluid environment with such physical and social capital that is enhanced by electric trains affirms its contribution to economic performance including the diffusion of knowledge that leads to innovation. It is a crucial mode of transportation for a sustainable and socially just future.
Germany’s rich diversity of infrastructure has evidently contributed to its economic performance as a major exporter. Thus, producing sustainable infrastructure such as electric trains embodies sustainable development across urban and rural areas and enhances the social capital that would ideally foster sustainable innovation. The electric train industry has a market share of 0.03% in the German market with a gross export value of $502 million. From the global market perspective, German manufacturing prowess accounted for nearly 50% of global electrical train exports in 2020. Notably, Austria, Germany’s southern neighbor, was the largest importer of electric trains in 2020, accounting for 21.05% of global electric train imports. This data alone suggests a relationship between Germany and Austria in regard to the electric train industry. In 2019, the Austrian Federal Railways (ÖBB) ordered a total of 189 Desiro ML regional trains from the Siemens AG corporation, a technology company focused on industry, infrastructure, transport, and health care that is headquartered in Munich. Each train has a seating capacity of 2020 passengers, reducing the carbon footprint per individual compared to those in combustion engine cars and even electric cars in some cases. The trains will be produced at the Siemens Mobility plants in Krefeld, Germany, and Graz, Austria, and the final assembly will take place at ÖBB’s Technical Services factory in Jedlersdorf, Austria. Germany’s gross export of electric trains will undoubtedly increase for multiple reasons. The electric train industry demonstrated a high product complexity index (PCI) of 0.846 in 2020, promising growth for the German economy. The PCI of a product refers to its rarity and sophistication due to the know-how required to produce it as a high PCI means only a few, highly complex countries can make the product. In addition, Austria, the largest importer of electric trains with an established trade system with Germany, is continuing its commitment to sustainable transportation by financing $960 million in zero-emission mobility projects in 2022.
Through the reliance on state-of-the-art infrastructure, companies such as the Austrian Federal Railways (ÖBB) maintain some of their production within Germany, especially due to its geographic proximity to Austria. The continued manufacturing of sustainable transportation such as electric trains not only benefits Germany’s economic performance but also provides the opportunity for enhancing the social capital of importing countries like Austria — a necessity for collaboration and innovation towards a more sustainable future.
