What is the right course of action?

You answered correctly. In situations where another vehicle suddenly pulls out into your lane, German road rules require you to brake to avoid a collision, even if you have the right of way. Additionally, you should increase your following distance to the vehicle ahead once it moves into your lane. This gives you extra time to react in case the car in front brakes suddenly or there is another unexpected event. Maintaining your speed would not be safe in this situation, as it could lead to a rear-end collision or not provide enough space to stop safely. Always anticipate the actions of others, especially near parked cars, and adjust your speed and distance to maximize safety.