The Rise of Robin Zeng and the Electric Battery Revolution in World Capitalism

Forget it Elon Musk. The most important man in world capitalism is called Yu Qun Zeng, Robin Zeng for western friends. He will make a difference in our lives, but little is known about him. He is 55 years old, officially resides in Hong Kong, has a doctorate in physics from the Chinese Academy of Sciences, has assets estimated at between thirty and forty billion dollars (37th in the world) and is the founder, executive chairman and majority shareholder of Contemporary Amperex Technology Ltd (Catl). His company controls over a third of the world electric battery market and is the main supplier of 20th century capitalism giants such as Ford or BMW and 21st century champions such as Tesla.

The Chinese car boom leaving Italy behind

All of this is tremendously important. According to the International Energy Agency (IEA), last year, worldwide spending on the purchase of electric cars was close to 500 billion dollars. That was a 50% increase over 2021. This year will definitely have maybe even more growth. While we in Italy play around dreaming of biofuels, in the last months of 2022 the share of registered cars that only run on electric batteries in Europe (not to mention hybrids) far exceeded those on diesel. The latter were the dominant technology until a few years ago, a flagship of the European industry capable of presiding over 53% of the car market still in 2014. Today diesel is destroyed by the scandals of Volkswagen, which rigged emissions tests to hide the obsolescence of its model in the face of climate challenges. Cars with a lithium battery today they represent the majority of models sold in Europe, but Europe is nothing: half of the nearly thirty million models in circulation today are found in China. Whatever the European directives say, in a few years new cars only running on petrol or diesel will be a rarity.

We are facing a revolution that is not only technological or of an industrial model. It also invests the trade flows of Europe (Italy included) and questions our destiny as an advanced society: without even digging up what it represented producing cars for Italy in the 1900s, just think that this sector is directly worth more than a tenth of all European industry. In addition, of course, to all related activities.

Yet we are on the verge of becoming addicted to the mysterious, brilliant Robin Zeng. An entrepreneur with a doctorate in physics whose Chinese name only reveals references to patents on the web. A man who founded the first lithium battery company at a very young age, he sold it to a Japanese multinational electronics companythen launched a spin-off that today is the world champion of the technology of the moment.

Now take a good look at the implications in the chart above (by Mercer). It shows the trade flows in car sales between China and the European Union in the last few years. In the past, Europe had a huge surplus, selling cars for five or six billion euros a quarter to the Chinese (including Italian components for German cars) and importing next to nothing. Today Europe is still profitable, but China exports battery-electric cars to the EU for about ten times the value of the opposite direction. We are clearly in a trade deficit on the new technology that is gaining ground in a sector once dominated by Europe. We remain in surplus only in declining technologies. Meanwhile – notes Brad Setser of the Council on Foreign Relations – China has gone from exporting cars to the world for 15 billion dollars a quarter in 2021 to exporting 70 billion today.

As for us – Italians and Europeans – we are so late that we don’t even understand what is happening around us. It’s not just that six of the top ten electric battery manufacturers are Chinese, three are South Korean and one is Japanese. Even more important is the way they are moving in Europe. In the last few years, four of these producers have announced over eleven billion euros in “green field” investments (meaning, factories out of nothing) in just one country of the European Union: the illiberal, pro-Russian Hungary, permeable to China’s ‘autocrat Viktor Orban. Of that regime we perceive the authoritarianism, the complicity with the Kremlin, the kleptocracy. Chinese and Korean investors the ease of doing business, laws and therefore semi-slave labor costs, strong tax cuts and no political risk for companies owned by Beijing’s public banks. As Orban works to make Hungary the hub of electric batteries in Europe, on which large groups such as Volkswagen, BMW or Daimler will depend. It goes without saying that the investments are guided by a 7.3 billion project by Robin Zang’s Catl, also him. In three or four years, Orban’s corrupt and opaque Hungary has attracted more technological investment from abroad than Italy has ever had in its history. We can deprecate many of the Budapest autocrat’s methods – rightly so – but the Italian ruling classes did not have his lucidity in reading the great technological shifts of this century. The related skills will be accumulated in Hungary, not in Italy.

Now look at the second graph, above. It represents the ranking of the first twenty positions of the Economic Complexity Index. Developed by Cesar Hidalgo (Massachusetts Institute of Technology) and Ricardo Hausman (Harvard), this index summarizes the production capacity of each country on the basis of the knowledge accumulated by its population compared to that present in other countries. Italy dropped from 13th position in 2001, to 17th in 2011, to 19th in 2021. It has recently been overtaken by Hungary, as well as Slovakia, Slovenia and the Czech Republic. But in reality all the major countries of Western Europe have lost ground in the last twenty years. Rising are East Asian economies such as Singapore, Taiwan or South Korea and precisely those of Central-Eastern Europe. And what we know about this ranking is that the higher a country rises, the more it tends to have a higher income per inhabitant (taking into account the different cost of living in different places). And vice versa if it goes down. Indeed, this effect becomes more and more pronounced as the technological content of an economy becomes more and more important in this era.

Yet a recent study by Andrea Orame and Daniele Pianeselli of the Bank of Italy shows how in our country companies have not prepared for the electric revolution by filing more patents or by merging with each other. Fiat-Chrysler between 2013 and 2018 did not produce a single battery-powered model, while even in backward Europe many dozens were produced. And the IEA shows that Italy not only has few electric models in circulation, but also has a number of recharging points below the world average in proportion to the number of cars present.

They are underdevelopment levels, unacceptable. Let’s continue like this, and there will come a time when we will no longer be able to define ourselves as one of the most advanced countries. But Italy is only a particularly striking case of a malaise that crosses the whole of Western Europe. And batteries are an example of a more general technological-industrial delay in this part of the world. This is why I don’t understand the sense of giving up possible investments by cutting the recovery plan or designing the new European rules that are not very suitable for these years. The point is knowing how to invest with at least a little of Robin Zang’s clairvoyance.

This text is taken from newsletter «Whatever it takes» by Federico Fubini.