Berkshire Hathaway has decreased its investment in the Chinese electric vehicle manufacturer BYD for the 11th time in less than a year, as Warren Buffett and Charlie Munger declared that they do not wish to rival Elon Musk. The sale of almost 2 million shares took place last week, leaving Berkshire with just under 10% ownership of BYD, which competes with Tesla as the largest producer of electric vehicles worldwide. Currently valued at slightly over $3 billion, Berkshire's stake in BYD was sold on May 2, just before Buffett and Munger's announcement at the company's annual shareholder meeting that they do not want to compete against Musk. "We don't want to compete with Elon in a lot of things," said Buffett on Saturday, with Munger adding, "We don't want that much failure."
When asked if they believe Elon Musk overestimates himself, Warren Buffett and Charlie Munger acknowledged that while it may be possible, they still view him as an incredibly talented and brilliant mind who has achieved great success, likely due to his tendency to aim for extremely challenging goals.
Munger stated that Musk would not have accomplished what he has in life if he hadn't pursued impossibly high objectives and demonstrated his ability to complete them. "He likes taking on the impossible job and doing it," Munger added.
Berkshire Hathaway initially invested in BYD in 2008, spending only $232 million for the stake. According to regulatory filings from Hong Kong, the company owned approximately 21% of BYD in late 2021, worth more than $7 billion at its peak last year. However, Berkshire has been selling off its BYD shares for profit and reallocating the funds, although this decision is unlikely due to a desire to avoid competing with Musk in the EV industry.
During an interview with CNBC last month, Buffett stated that they will find better investment opportunities for the BYD funds, and that while they are not in a hurry to sell, his role is to allocate capital.
Berkshire Hathaway's stake in BYD has experienced significant growth, and the company may be selling some of its shares to reap profits and allocate the capital elsewhere, such as in Occidental Petroleum.
Moreover, Warren Buffett has recently expressed concerns about the escalating geopolitical tensions between China and Taiwan. This is what led him to sell his stake in Taiwan Semiconductor just a few months after acquiring it. Given the potential for these geopolitical risks to affect a Chinese automaker like BYD, it is possible that they are also contributing to Berkshire's decision to sell off its BYD shares.
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