Warren Buffett’s Berkshire Hathaway has significantly reduced its investment in Chinese electric car company BYD, according to recent filings. Over the past 18 months, Berkshire Hathaway has sold off more than half of its stake in BYD. The most recent sale occurred on October 25th, just days before BYD announced record quarterly earnings. Some analysts have raised their price targets for BYD following these impressive results.
Paul Gong, the head of China auto at UBS Global Research, noted that BYD’s auto segment achieved a net profit of Rmb9.4 billion ($1.28 billion) during the quarter, which equals Rmb11.4k net profit per car. Gong believes that these strong results are due to economies of scale, increasing export sales, and decreasing lithium prices. UBS has raised its price target for BYD shares to 360 Hong Kong dollars ($46), almost a 50% increase from the previous closing price.
Berkshire Hathaway has been selling its BYD shares at an average price of 245.86 Hong Kong dollars. As a result, the company now holds less than an 8% stake in BYD. The reason behind Buffett’s decision to reduce the investment is unclear. It was not discussed during a shareholders meeting in May, and Buffett only mentioned in an interview that he believes there are better investment opportunities.
BYD, founded by Wang Chuanfu in 1995, has grown into a major player in the auto industry as demand for electric cars increases. In the third quarter, BYD produced more purely battery-powered passenger cars than Tesla, according to CNBC calculations. Analysts at Bernstein also revealed that BYD is the top choice for Chinese consumers when buying an electric car. The company offers a wide range of electric cars at various price points, making it a popular choice among consumers.
BYD is not only dominating the Chinese market but is also expanding its presence overseas. The company has started exporting cars to Southeast Asia and Europe, with analysts predicting a doubling of export sales next year. Jefferies, an investment bank, has raised its price target for BYD shares to 331 Hong Kong dollars, believing that the company will continue to thrive.
Charlie Munger, Buffett’s business partner, praised BYD’s leader and emphasized his confidence in the Chinese economy. In a podcast interview, Munger stated that the leader at BYD is better at manufacturing cars than Elon Musk, the CEO of Tesla. Munger also expressed his optimism about investing in China, stating that the country’s leading companies have a stronger future outlook compared to other major economies.
Overall, despite Berkshire Hathaway reducing its stake in BYD, the future looks bright for the Chinese electric car company. With positive earnings, increasing export sales, and high consumer demand, BYD is positioned for continued success in both the domestic and international markets.
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