Berkshire totally exits its profitable stake in Chinese EV maker
News Summary
Berkshire Hathaway has completely exited its extremely profitable equity investment in the Chinese electric vehicle maker BYD. The initial 225 million share position was purchased in 2008 for $230 million. Berkshire began reducing its stake in August 2022, when the investment's value had surged to $9 billion in the second quarter of that year. By June of last year (2024), Berkshire had sold almost 76% of its stake, dropping below the 5% disclosure threshold under Hong Kong exchange rules, thus no longer requiring public disclosure of subsequent sales. However, a Q1 2025 financial filing by Berkshire Hathaway Energy, the subsidiary holding the shares, listed the investment value as zero as of March 31, 2025. A Berkshire spokesperson confirmed the entire BYD position has been sold. During Berkshire's ownership, BYD shares increased by approximately 3890%. Warren Buffett had previously explained that while he views BYD as an "extraordinary company," Berkshire would find "things to do with the money that I'll feel better about." He also cited re-evaluating geopolitical risk, particularly concerning Taiwan, when selling Taiwan Semiconductor shares in 2023, which may parallel the rationale for the BYD divestment.
Background
Berkshire Hathaway's investment in BYD commenced 17 years ago, in 2008, at the strong urging of Charlie Munger. Munger famously described BYD and its CEO, Wang Chuanfu, as a "damn miracle" at the time. This complete divestment comes amid heightened global geopolitical tensions, particularly concerning U.S.-China relations and the Taiwan Strait. Warren Buffett previously stated in 2023, after selling Taiwan Semiconductor shares, that he "reevaluated" the geopolitical risk posed by Beijing's claim over Taiwan, remarking that "It's a dangerous world." This highlights geopolitical considerations as a significant factor in his investment decisions. The article also notes a partial agreement between incumbent U.S. President Donald Trump and Buffett regarding corporate focus on long-term versus short-term goals. President Trump has proposed that the SEC allow corporations to report earnings every six months to encourage a longer-term operational outlook. Buffett, a renowned proponent of long-term investing, has consistently urged companies to cease providing quarterly earnings-per-share guidance, believing it fosters an unhealthy focus on short-term profits at the expense of long-term strategy.
In-Depth AI Insights
What strategic shifts does Berkshire's complete exit from BYD signal, beyond stated geopolitical concerns? - Berkshire's move may indicate a fundamental shift in its risk assessment for long-term holdings in Chinese high-tech or strategically sensitive assets, even those with superior performance. This appears to be more than just profit-taking; it's likely a direct response to rising geopolitical risk premiums. - Given Buffett's explicit mention of geopolitical risk when selling TSMC shares previously, the divestment from BYD, even if its prospects remain strong, suggests that with President Trump in office and U.S.-China tensions persisting, capital is re-evaluating the long-term stability of its commitments in China. - This action could prompt other risk-averse global institutional investors to re-examine their Chinese exposures, particularly in sectors that might be deemed strategically significant by Western powers, such as electric vehicles and advanced technologies. What are the deeper implications of this divestment for BYD and the broader Chinese EV industry? - While Berkshire's stake was already below the disclosure threshold, and its exit might not cause immediate drastic stock price movements for BYD, the symbolic impact is significant. The complete withdrawal of one of the world's most respected value investors could erode confidence among some international investors in BYD and potentially the wider Chinese EV market. - For BYD, despite its inherent strengths, losing the endorsement of a heavyweight like Berkshire could present challenges in terms of brand credibility and attracting certain types of long-term capital during its international expansion. The Chinese EV industry, as it seeks global leadership, may face increased scrutiny and potential trust barriers. - This event might push Chinese enterprises to rely more heavily on domestic capital markets and policy support, while accelerating their self-sufficiency in technology and supply chain localization to reduce susceptibility to external geopolitical fluctuations. How might the 'consensus' between Buffett and Trump on corporate short-termism potentially influence capital market regulation? - Despite differing motivations and contexts, Buffett's long-standing opposition to quarterly earnings guidance and President Trump's proposal for semi-annual reporting suggest a degree of cross-cutting resonance on the issue of 'anti-short-termism.' This alignment could create political fertile ground for future adjustments to SEC disclosure requirements. - If the SEC were to adopt a less frequent reporting schedule, it could alleviate undue pressure on public companies to meet short-term targets, encouraging them to allocate more resources to long-term R&D and strategic investments. This would be beneficial for innovative companies with lengthy development cycles. - However, reduced reporting frequency could also lead to decreased market transparency, making it harder for investors to obtain timely information. This would challenge quantitative traders and short-term investors who rely on high-frequency data and could potentially compromise market efficiency in the short run.