Back in 2011 Elon Musk laughed out loud at BYD, nearly three years after Warren Buffett’s Berkshire Hathaway invested in the Chinese electric-vehicle company. Buffett may be the one chuckling now, why? Because Berkshire has notched an almost 40-fold gain on its wager so far.
Just over a decade ago, the slightest mention of BYD was enough to provoke a fit of giggles from Tesla CEO Elon Musk. In a Bloomberg interview back then, he mocked BYD by saying:
“Have you seen their car? I don’t think they have a great product. I don’t think it’s particularly attractive, the technology is not very strong. The company [BYD] was in deep trouble in China and should focus on staying in business there.”
BYD has clearly defied the Tesla CEO’s expectations. Its revenues mushroomed by almost 10-fold to 211 billion Chinese yuan ($32 billion) between 2008 and 2021, helping to triple its net income to 3 billion yuan ($450 million) last year. Moreover, the company’s sales of electric and hybrid vehicles soared by 250% to a record 114,000 units in May, lifting its cumulative unit sales past the 2 million mark. In comparison, Tesla generated nearly $54 billion in revenue and $5.5 billion in net income last year, and produced and delivered more than 300,000 vehicles last quarter.
Berkshire spent $232 million to buy 225 million of BYD’s Hong Kong-listed shares in 2008. BYD’s stock price has soared from the yuan equivalent of $1 to $40 since then, boosting the value of Berkshire’s 7.7% stake to over $9 billion today. BYD has benefited from the intense hype around electric-vehicle companies such as Tesla and Rivian during the pandemic. Investors have sent the Chinese automaker’s shares up more than seven-fold since the start of 2020, and 18% this year alone, raising its market capitalization to $138 billion.
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Buffett, who mostly invests in US companies such as Apple and Coca-Cola, took a stake in BYD at the insistence of Charlie Munger, his business partner and Berkshire’s vice-chairman. Munger convinced him by trumpeting BYD’s CEO, Wang Chuanfu, as a combination of Thomas Edison, Henry Ford, and Bill Gates in one person, one of Munger’s close friends recently revealed.
Musk may have changed his mind about BYD over the past decade. A senior BYD executive recently told Chinese state media that the company was preparing to supply batteries to Tesla soon, and described Wang and his team as “good friends” with Musk, Reuters reported earlier this month.
A 3d animation professional with over 20 years of industry experience having served in leading organizations & production facilities of Pakistan, an avid car enthusiast and petrolhead with an affection to deliver writings to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com