In a drab industrial zone of western Shanghai, amid factories that each year crank out hundreds of thousands of gasoline-powered cars, transmissions, and engines, the world’s largest automaker is racing to finish a new sort of plant, one that will produce a car unlike any it has made before. The 74-acre facility will have a newfangled assembly-line conveyor belt made of plastic instead of the typical steel or wood—a system that should be cheaper to reconfigure on the fly in order to manufacture cars whose shapes and layouts are likely to change more frequently and radically than any model the company has previously built. And the plant will be decked out with infrared cameras to monitor the safety of stockpiles of a component the company hasn’t before had to deal with in large volume: enormous batteries—each nearly as big as two coffins side by side—that have a nagging propensity to ignite.

What’s happening here in Shanghai is no incremental industrial tweak. It’s Volkswagen AG’s bet-the-corporation bid for supremacy in the electric-car age. “Volkswagen” translates as “the people’s car,” and for much of the eight decades of VW’s existence, the people were understood to be European or American and the cars to run on petroleum. But now VW’s biggest market is China, and the company, squeezed by new environmental mandates, has resolved to remake itself largely as a producer of electric vehicles, or EVs. Which makes this new Shanghai plant the forward base in the fight of VW’s life. When it starts producing electric vehicles next year, it will be VW’s “most modern factory worldwide,” says Fred Schulze, who heads production in Shanghai for VW’s joint venture in China with SAIC Motor, the Shanghai-based firm that is China’s biggest state-owned automaker. Schulze, a VW veteran, previously oversaw production of sport-utility and crossover vehicles from VW’s Audi unit—mostly gas-guzzlers such as the Q7 and Q8 but also the electric E-tron. From now on, Schulze says of VW, “our growth should be from EV cars.”

All across the global economy, titans of the fossil-fuel era are scrambling to adapt to an existential shift: the soaring economic viability of clean alternatives to dirty energy. Electricity and oil producers are struggling to ride—­rather than be crushed by—a renewable-­energy wave. Banks are trying to shore up their portfolios against losses induced by climate change. Automakers, though, are at a particularly scary fork in the road. The rise of electric vehicles—machines with multiple small motors instead of one big engine; with batteries instead of a fuel tank; with unprecedentedly extensive software systems instead of a transmission—is poised to redefine car making. If established automakers don’t adapt, and fast, the corporate infrastructure they have long seen as a signature asset may prove instead an insupportable stranded cost.

It’s far too soon to declare the end of the internal-combustion era. In the six months ended June 30, according to Wood Mackenzie, an energy-data firm, 97% of all new passenger cars sold globally had only an oil-burning engine under the hood. But it’s not too early to see that electric cars are coming on fast. Indeed, sales are shooting up beyond many supposed experts’ wildest projections. Globally, according to Wood Mackenzie, combined sales of passenger EVs—including full-electric vehicles, which have no combustion engine, and “plug-in hybrid-electric” vehicles, which augment their battery system with a combustion engine—jumped 47% from the first half of 2018 to the first half of 2019, to 1.1 million. The surge is being driven by a combination of factors: declining cost and improving technology, notably for batteries; increasingly convenient electric-charging infrastructure, particularly in large cities; and hefty government support.

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