Is Warren Buffett leaving Tesla competitor BYD?

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• BYD with strong business and stock performance
• Rumors of Warren Buffett’s exit
• Does BYD have a lithium problem?

The electric car manufacturer BYD recently dethroned Tesla in terms of the number of electric cars sold: Corona-related production outages in China had affected the US group and caused the number of deliveries to decline. In the second quarter, Tesla sold only 254,695 vehicles, compared to 310,000 cars in the first quarter. Cumulatively for the first half of the year, Tesla sold 564,000 vehicles – and was overtaken by BYD for the first time in this key figure. The Chinese competitor increased its sales in the first half of the year by 315 percent to 641,350 vehicles.

BYD as an investor darling

BYD’s successful course is also reflected on the stock market: Unlike competitor Tesla, BYD has been able to improve its share price since the beginning of the year. In general, the balance sheet of the BYD share is extremely positive: In the last three years alone, the Hong Kong stock exchange has risen by more than 500 percent.

A well-known major investor in BYD, the US entrepreneur Warren Buffett, should be particularly pleased about this. In 2008, on the advice of his vice president at Berkshire Hathaway, Charlie Munger, he bought BYD for 230 million US dollars and bought 225 million BYD shares. In the meantime, the value of his shares has risen to over nine billion US dollars, so the bet on the then unknown Chinese group has paid off for the star investor.

Is Warren Buffett pulling the ripcord after 14 years as an investor?

Recently, however, speculation has increased that Buffett, after 14 years as a BYD shareholder, could now have initiated an exit from the electric car manufacturer. The cause of the rumors of a Buffett withdrawal was the fact that a short position in the Hong Kong clearing system, which corresponded to around 20 percent of BYD shares, appeared. This is how high Buffett’s stake in the electric car maker is. If Buffett really was the seller of the huge stake, the 91-year-old would have made billions of dollars from his investment. After the position in Hong Kong became known, the BYD share fell sharply, but was able to recover in the following days.

Most recently, only a few negative reports had mixed in with the mostly positive reporting on BYD. In May, BYD called 10,000 vehicles back to the workshops: safety concerns about the battery packs of the electric cars made the recall necessary. In principle, however, BYD had mostly good news to report: This included, among other things, a cooperation with the US group NVIDIA in the field of automated driving, but also the news that the company had secured access to lithium deposits – one of the most important raw materials in the construction of Batteries for electric cars.

Do Buffet and Munger know more?

Still, the market remains concerned because if Buffett and Munger exit such a profitable investment, there could be more to it than the general public realizes. Especially since another major BYD investor has already turned parts of his investment into money in the recent past: Himalaya Capital reduced its stake in 2021 from 7.03 to 6 percent, according to Fortune. Himalaya Capital founder Li Lu was the investor who initially brought BYD to Charlie Munger’s focus.

Bloomberg columnist Anjani Trivedi suspects that despite recent success reports, the lithium supply could become a problem for the Chinese. Although BYD was able to deal with the cost pressure associated with the shortage of raw materials, access to the raw material is not guaranteed. Because there will be no immediate and guaranteed supply of lithium. Meanwhile, the expert points out that key battery patents that limited production to China are expiring, so the types of batteries that BYD manufactures are gaining traction outside of China, which should further boost demand.

In addition, according to analysts, the mines in which BYD has a stake may not last as long and as productively as hoped. “Whether it’s a Buffett or someone else’s stake, investors are nervous when it comes to commodity supplies and costs, no matter how vertically integrated a company is or how good the revenue forecasts are,” Trivedi continued.

However, it is still unclear whether it is actually the star investor’s share that recently appeared as a sell position in the Hong Kong clearing system. Investors won’t be able to get more information about this for a few weeks, when Buffett submits his 13F form.

Editorial office finanzen.net

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