Charlie Munger, the vice-chairman of Berkshire Hathaway, recently expressed his cautious approach towards investing in the automotive industry. In a rare, in-depth interview on the Acquired podcast, Munger emphasized the challenges faced by the auto industry, including the uncertainty surrounding the rise of electric vehicles, evolving sales strategies, and labor union issues. Munger stated, “I just don’t even look at the auto industry.”
Interestingly, Munger played a pivotal role in Berkshire Hathaway’s investment in Chinese battery maker BYD. In 2008, he convinced Warren Buffett to purchase a 9.9% stake in the company for $232 million. BYD has since become a major player in the electric vehicle market. Last August, Berkshire Hathaway disclosed its first reduction in its BYD position, as its value had grown 35-fold. The conglomerate has continued to sell its shares this year.
Munger described his investment in BYD as a venture-capital type of bet. He revealed that he tried to dissuade BYD’s CEO, Wang Chuanfu, from entering the auto business due to its challenging nature. Munger expressed both admiration and apprehension towards BYD, stating that they make him nervous due to their aggressive approach.
Munger also praised Wang’s exceptional talents and manufacturing expertise. He highlighted Wang’s ability to analyze and improve auto parts, stating that Wang could “figure how to make the goddamn thing.” Munger further remarked, “The guy at BYD is better at actually making things than Elon is,” referring to Elon Musk, the CEO of Tesla and SpaceX.
This is not the first time Munger has shared his thoughts on Musk and Tesla. In February, he applauded Musk’s accomplishments in the auto industry but hinted that he expects BYD to surpass Tesla in the electric vehicle race. Munger believes that despite Musk’s genius, there will always be competitors like BYD that outperform.
In May, Munger outlined a significant difference between Musk and the Berkshire bosses. While Musk takes on ambitious projects like transitioning to clean energy and colonizing Mars, Munger and Warren Buffett prefer investing in more traditional industries such as car insurance and fast food. Munger remarked, “He likes taking on the impossible job and doing it. We’re different. Warren and I are looking for the easy job.”
Overall, Munger’s cautious approach to the auto industry and admiration for BYD’s manufacturing prowess highlight his investment philosophy and preference for businesses that offer a higher chance of success.
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