Warren Buffett’s Berkshire Hathaway wraps up 17-year investment in Chinese EV maker BYD
News Summary
Berkshire Hathaway, the investment firm controlled by Warren Buffett, has liquidated its entire holdings in Chinese EV maker BYD, concluding a 17-year investment that yielded over a 30-fold return. This full exit was confirmed by the latest quarterly report from Berkshire Hathaway Energy, the subsidiary holding BYD's Hong Kong-listed shares, which showed a zero position, following a series of stake reductions initiated in 2022. The divestment comes as China's EV industry grapples with decelerating sales, shrinking profits, and oversupply concerns, issues exacerbated by pressures from the US and the European Union. China's EV sales grew 27% year-on-year in August, a slowdown from the 40% growth seen in the first half. Following the news, BYD's shares dropped 3.2% in Hong Kong and 1.7% in Shenzhen. BYD noted that Berkshire Hathaway's stake had fallen below the 5% disclosure threshold by June of the previous year.
Background
Berkshire Hathaway first invested in BYD in 2008, when China's EV market was nascent. This prescient investment was viewed as Warren Buffett's endorsement of Chinese innovation and the new energy vehicle industry. Over the 17-year holding period, BYD grew from a relatively small automaker into a global EV powerhouse, significantly expanding its technology and market share. However, in recent years, the Chinese EV industry has faced intensifying competition, significant overcapacity, and increasing domestic 'involution.' Furthermore, under the Trump administration, the US and the European Union have escalated trade barriers and scrutiny against Chinese EVs, making it more challenging for Chinese EV manufacturers to penetrate international markets.
In-Depth AI Insights
What deeper signals might Berkshire Hathaway's full exit send beyond simple profit-taking, especially given the current geopolitical and industry context? - Berkshire Hathaway's complete exit may signify more than just the end of an investment cycle or locking in substantial gains. It likely reflects a cautious stance on the future growth prospects of China's EV market, particularly under the dual pressures of rising global trade protectionism (e.g., US and EU tariffs and scrutiny) and intensified domestic competition squeezing profit margins. - This move could suggest a strategic 'de-risking' consideration, withdrawing capital from a sector increasingly prone to geopolitical friction and regulatory uncertainty. This aligns with the Trump administration's continued hawkish stance on China and the broader trend of global supply chain restructuring. How might this divestment impact investor sentiment towards Chinese EV companies and the broader Chinese tech sector? - Buffett's long-term, successful investment was a powerful endorsement for China's EV sector and its leader, BYD. This complete withdrawal will undoubtedly diminish some international investors' confidence in the long-term growth potential of Chinese EVs and related strategic high-tech industries. - It may prompt other institutional investors to re-evaluate their exposure to China's high-tech sectors, especially those vulnerable to policy intervention or international trade friction. This could lead to capital outflows or a re-rating of relevant stock valuations. What are the broader implications for US investors considering long-term investments in Chinese strategic industries under the continued Trump administration? - Berkshire Hathaway's divestment reinforces the narrative of increasing risks for US investors considering long-term investments in strategically sensitive Chinese sectors during the Trump administration's tenure. - It suggests that even investors with deep market insight and a long-term perspective may now view geopolitical risks and regulatory uncertainties as having reached a level warranting strategic exit. Investors might be guided towards Chinese sectors with lower geopolitical sensitivity or clearer domestic growth drivers.