Warren Buffett Deals a Blow to a Chinese Rival of Tesla

Warren Buffett remains a legend in global business circles. 

The Oracle of Omaha is celebrated even by the new generation of investors, even as they criticize him for his acerbic words about cryptocurrencies, particularly bitcoin. 

But when Buffett, who recently turned 92, speaks, the whole financial world listens. And often, the billionaire speaks loudest with his actions, which can have serious consequences for the companies they affect and their managements.

The latest example: the Chinese vehicle manufacturer BYD, one of Tesla’s  (TSLA) major Asian rivals. 

A little over a month after speculation that the iconic investor was going to liquidate his entire stake in BYD, he has just taken a decision a bit short of the speculation.

Buffett Trimmed His Stake in BYD

Buffett reduced his stake in BYD, which is listed on the Hong Kong Stock Exchange and traded in the U.S. as an American depositary receipt.  (BYDDY)

He trimmed his stake to 19.92% from 20.04%, according to a regulatory filing that you can see here

On Aug. 24 Buffett’s Berkshire Hathaway  (BRK.A)  sold 1.33 million BYD shares at an average HK$277.10 (US$35.30), a total value of $47 million. The Omaha holding company now owns 218.72 million shares, the filing showed.

For investors the reduction came as a thunderclap. BYD shares gave up more than 12% during the Aug. 31 trading session in Hong Kong. Investors are wondering about the intention behind Buffett’s decision and whether it portends more cuts in the stake. 

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Indeed, the billionaire in 2007 followed this path with his investments in PetroChina, another Chinese flagship. Buffett had liquidated his position in the energy giant in several stages/transactions carried out over three months. 

It’s hard to know what prompted Buffett to reduce his stake in BYD, one of China’s most prominent companies. He has been supporting BYD, which makes vehicles and produces semiconductors and batteries for electric vehicles, for 14 years. The investor first put money into BYD in 2008 and Berkshire’s stake is currently valued at several billion dollars.

BYD Is Expanding

BYD is on the rise. The company has just expanded in international markets through partnerships with local players in Japan, Thailand, Germany, Sweden, the Netherlands and Costa Rica.

On Aug. 29, BYD reported that first-half net income tripled from a year earlier to 3.6 billion yuan (US$520 million), a news release shows. Half-year revenue rose 66% to 150.6 billion yuan ($21.85 billion).

“The group has taken the lead in the scale and rapid development of the new energy vehicle industry,” BYD said its earnings’ report. 

“According to data from the China Automobile Association, the group’s market share of new energy vehicles reached 24.7% in the first half of 2022, representing an increment of 7.5 percentage as compared to 2021, leading the domestic new energy vehicle market, and returning to the No. 1 position in the global sales of new energy vehicles, and led the rise of Chinese independent brands.”

BYD, founded in 2003, sold 641,350 new-energy vehicles in the first half, according to company filings with the Hong Kong Stock Exchange. 

Not all the vehicles are electric.

For its part, Tesla, the world leader in the electric-vehicle market, delivered 564,743 vehicles over the same period, including 254,695 units in the second quarter.

BYD, like Tesla, is taking advantage of Beijing’s political effort to push consumers to reduce carbon-dioxide emissions.

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