Warren Buffett‘s Berkshire Hathaway (NYSE: BRK.A) has reduced its stake in BYD (SHE: 002594), China’s largest producer of electric vehicles, to below 5%.
On July 16, Berkshire lowered its stake in BYD’s issued H-shares to 4.94% from 5.06%, worth approximately 36.40 billion CNY ($5.10 billion), according to a filing with the Hong Kong Stock Exchange. The stake was 7.02% as recently as June 11.
Hong Kong regulations mandate larger shareholders to disclose sales when their stakes fall below whole percentage numbers, and disclosures can cease once ownership drops below 5%.
This could be Buffett’s way out of the EV industry, as he has repeatedly said that he sees it as “too unpredictable.” At the same time, this could be the last time Berkshire discloses stock sales of this company.
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Buffett invested in BYD way back in 2008
Berkshire Hathaway began its investment in BYD in 2008, paying $230 million for approximately 225 million shares, representing a 10% stake in the company.
Charlie Munger, Berkshire’s late vice chairman, drove the decision to invest. The company started selling BYD shares in August 2022, after the stock price had increased more than twentyfold, following a record high set two months prior.
BYD has shown strong earnings recently, with a net profit of 4.5 billion yuan ($619 million) for the January-March period, marking an 11% increase from the previous year. From January to June, new car sales rose by 28% year-on-year to 1.61 million units, and international sales are also on the rise.
However, some analysts expect BYD’s sales growth to slow due to intense price competition in the Chinese market, which might be an additional reason for Buffett to reduce his holdings slowly.
BYD is the main Tesla competitor
Founded in 1995 by Chinese chemist Wang Chuanfu, BYD initially specialized in rechargeable batteries before becoming a significant player in the electric vehicle market. Last year, BYD surpassed Elon Musk‘s Tesla (NASDAQ: TSLA) to become the world’s largest electric vehicle maker.
However, Tesla has since reclaimed the top spot. BYD sold 426,039 electric vehicles in the second quarter, while Tesla sold 443,956.
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