Berkshire Hathaway, the investment firm led by Warren Buffett, has sold more than half of its stake in BYD, the Chinese electric vehicle (EV) maker, since last summer. The investment firm’s remaining stake in BYD, which is now worth around $3.9 billion, is still significant, and the company’s leadership has praised the carmaker's performance in the EV market.
BYD, which stands for "Build Your Dreams," is a company that has seen tremendous growth in recent years, with its 1.86 million deliveries in 2022 marking a 3x increase from the previous year. As a result, BYD has become the world’s top-selling electric car maker, with sales that include both hybrid and fully-electric vehicles. This is a remarkable feat, considering that the company was relatively unknown just a few years ago.
Charlie Munger, the right-hand man of Warren Buffett and a director at the Daily Journal Corp., praised BYD’s success during the firm’s recent annual meeting. Munger stated that Berkshire Hathaway’s investment in BYD was one of the best decisions he has ever made. “I have never helped do anything at Berkshire that was as good as BYD,” he said.
Munger went on to highlight that BYD has outperformed Tesla in the Chinese EV market, which he called "almost ridiculous." Munger also noted that BYD's cars are more affordable for middle-income Chinese consumers, with models selling between $14,500 and $29,000. BYD has increased the price of some of its more popular models, whereas Tesla has had to offer discounts for its cars.
BYD's success has been driven by its dominance of the Chinese EV market, which has seen a surge in demand as the government encourages a shift toward greener transportation. BYD has also benefited from the expiring consumer subsidies for EVs, which have pushed other car companies to slash prices to keep customers.
Berkshire Hathaway's recent sale of BYD shares is in line with Warren Buffett's philosophy of value investing, which involves buying undervalued shares and holding them until the market values them properly. Experts have suggested that Berkshire Hathaway's decision to sell a significant portion of its stake in BYD is a sign that the stock is overvalued.
Despite the recent sale of shares, Berkshire Hathaway’s remaining stake in BYD is still substantial, and the carmaker's performance in the Chinese EV market remains strong. BYD is also eyeing expansion in Japan and Europe, and the company's recent estimates suggest that it will make between $2.2 billion and $2.4 billion in net profit for 2022, which would represent an almost 1,200% increase from its net profit for 2021.
In conclusion, Berkshire Hathaway's recent sale of BYD shares has garnered significant attention, with experts weighing in on the future of the Chinese EV maker. While some have suggested that BYD's success may be overvalued, others remain optimistic about the company's future growth prospects. Either way, BYD's performance in the EV market has been nothing short of remarkable, and the company's leadership is sure to remain focused on expanding its operations and driving further growth.