Your standard "What if Dunkirk forced the allies into peace early" timeline except it's just Sonic the Hedgehog. Basically, Sonic is mainly engineered for a German market and only secondarily an American market.

The Lore

Sega, having its origins in US military occupation, has much different origins in this timeline and Japan's culture in general is changed enough that Sonic's whole personality and aesthetic is altered. Sega is now Nexgen and, Intending to appeal to both Germany and Japan, Sonic morphs from a cocky, freedom-loving punk with a hate for pollution and authority to a stoic, artistic individualist, with a hate for collectivism and imposition. Dr. Eggman is a super-genius ultra-commie obsessed with profit over blood- He's a paternalist, a collectivist, and a Klaus Schwab-styled modernity lover. He wants to wipe the world clean and rebuild it himself, and his immense wealth is derived primarily from usury, price gouging, and other immoral methods. Germany localizes his character into Dr. Yohanan Robotnik, a Polish Jew, which I regrettably feel I have to mention because the connection is just too obvious not to bring up. These character changes are due both to the shared enemy of the Soviet Union, and the shared attitudes of liberation among the rebellious youth of both nations.
Japan is under less external cultural influence here, such that they have very little desire to "adapt" Sonic to a foreign audience and so his Japanese roots are extremely obvious. Being ideological and military allies, Germany and Japan form a similar mutual adoration that Japan and America have in our timeline, making Sonic appear "exotic" and "novel" to Germans. Simultaneously, Mario in this timeline is not a first generation American immigrant, but a native, hard-working Italian, and due to withering relations with Italy (see Tyrol,) Mario is generally not beloved by the public, and is also intentionally restricted by the German government. Compare that to Sonic, who is fast, strong, opposed to the same things as the German youth- All of these things combined mean that Sonic ends up fulfilling Mario's role in Germany, and he usurps the cultural throne there.

Sonic the Hedgehog (1990)

Sonic 1 remains almost identical but with a lot of content jumbled around. Plenty of things stay but many release elements are swapped with previously unused beta content, and notably, Sonic's sprites are nice and fat, sort of like old Pikachu (slide 3.) On this development timeline his thicker design wouldn't be replaced until the marketing stage and so his ingame appearance is rather broad and animal-like.

Sonic the Hedgehog 2 (1991)

The original vision for Sonic 2 was, basically, what Sonic CD ended up being but more streamlined; Here, a combination of things including Sonic Team's makeup, Zuse KG's advancements, and other minor factors result in Sonic 2's CD-like vision being followed through with. Sonic Team is a bit less... neurotic, one could say, in regards to getting work done, and things are generally smoother for Nexgen.
The "Death Egg" and "Little Planet" are both replaced with the Robo-Zygote, a gargantuan structure which, at 150km across, is just a bit smaller than the Death Egg. Inside is an entire orbital habitat which can house life from Earth- Of course, there's not many inhabitants because most people wouldn't opt to join the orbital colony, but the point is that it's capable.
Outside of the time travel story elements, Sonic 2 plays mostly like normal except:

• The Peel-out replaces the Spindash but adopts the Spindash's "down + jump" control method, making it functionally identical in every single way while remaining visually distinct (and I guess also if you don't hold down you won't go into a spin but you literally have to press down to activate and use it so why would you not do that)
• Tails does not exist
• Silver Sonic does not exist, jumping straight to Metal. This change alone makes the job of lore-keepers in this universe 5 times easier

I'll post Sonic 3 and Sonic X-treme when I finish those. In the meantime, let me know what you think in the replies. It's okay, you can be mean to me, I really don't mind! Just don't bring up my Mom, okay?