Warren Buffett, speaking during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, has been making headlines for reducing the company’s stake in Chinese EV maker BYD to 6.9%. The conglomerate, an early investor in BYD thanks to the late Charlie Munger, recently sold an additional 1.3 million Hong Kong-listed shares of BYD for $39.8 million. This move decreased Berkshire’s holding from 7%, showcasing a continued trend of trimming their stake in the electric vehicle giant.
Back in 2008, Berkshire Hathaway initially purchased around 225 million shares of BYD for approximately $230 million. This investment proved to be highly profitable as the EV market experienced significant growth in China and beyond. In light of BYD’s impressive performance, Berkshire had already sold half of its holding through transactions in 2022 and 2023, especially after BYD’s stock price surged nearly 600% to a record high in April 2022 from the beginning of 2008.
It is worth noting that according to Hong Kong’s regulations, a filing is required only when a stake percentage crosses a whole number. Therefore, if Berkshire’s stake falls below 6%, another filing will be necessary to reflect the updated ownership percentage. This strategic move to reduce their stake in BYD indicates a shift in Berkshire Hathaway’s investment portfolio and priorities.
BYD, founded by Wang Chuanfu, initially started as a manufacturer of batteries for mobile phones in the 1990s before transitioning to producing automobiles in 2003. Over the years, the company has emerged as the leading car brand in China and a significant player in the EV battery market. In the fourth quarter of 2023, BYD surpassed Tesla as the world’s top EV maker by selling more battery-powered vehicles than its U.S. competitor.
Warren Buffett acknowledged in 2010 that Charlie Munger, the late vice chairman of Berkshire, deserves full credit for identifying the potential of BYD. Munger’s introduction to BYD came through his friend Li Lu, the founder of Seattle-based asset manager Himalaya Capital. This collaboration between Munger and Li Lu played a crucial role in Berkshire Hathaway’s initial investment in BYD and subsequent success in the EV market.
As Berkshire Hathaway continues to adjust its investment strategy, the decision to reduce its stake in BYD reflects the evolving landscape of the electric vehicle industry and global market trends. This move underscores the importance of strategic portfolio management and the ability to capitalize on emerging opportunities while navigating changing market dynamics.