Abstract: Recent regulation theory inspired studies have observed a re-orientation in the German governments’ industrial strategy toward a more activist state despite opposition of German industry. By highlighting a critical tension between politics and industry, this article evaluates the role of the state in establishing industrial strategic guidelines and the ways in which governments try to engage companies in a context of geo-economically motivated statecraft. The ongoing electromobility challenges in the German automotive industry underscore the fundamental contradictions inherent in the government-driven sectoral transformation, which attempts to replace an existing, successful business model with an alternative that has yet to prove viable. How can we explain the strategic positioning of the most powerful industry in Germany with regard to the politically mandated phasing out of its core business and the establishment of electric vehicle production, which is currently still not profitable? Furthermore, what contradictory trajectories characterize this transition? The analysis focuses on state-business relations during this transition, examining the interplay between political regulation and corporate strategies. This dynamic does not occur in isolation; rather, it is heavily influenced by specifically developed national modes of growth and companies’ productive models that emerge and constantly evolve within the context of global competitive conditions. In the case of the export-oriented German automotive industry, particular attention must be paid to the markets of China and North America. To adequately understand these complexities, a regulation theory framework will be employed.