After Thirteen Years, Buffett’s Investment in Obscure Chinese Automaker is Paying Off

After Thirteen Years, Buffett’s Investment in Obscure Chinese Automaker is Paying Off

The release of Berkshire Hathaway’s 2020 earnings report earlier this month shed light on how “one of Buffett’s boldest bets to date” —on Chinese automaker BYD” — is “paying huge dividends.” This according to an article in Fortune.

The article reports that thirteen years ago, “on the advice of his famously skeptical lieutenant, Charlie Munger,” Buffett invested $232 million (a 10% stake) in the then unknown company. Munger described BYD’s founder Wang Chuanfu— a chemist-turned-entrepreneur who had built one of the world’s largest manufacturers of rechargeable cell phone batteries before entering the automotive sector— as a “combination of Thomas Edison and Jack Welch.” Berkshire’s stake is now valued at roughly $5.9 billion as of the end of 2020 according to Buffett’s annual letter to shareholders.

Chuanfu established a foothold in the then-fledgling electric vehicle market by reportedly “parlaying BYD’s rechargeable battery technology into a fast-growing car making operation” by building longer-lasting batteries and cheaper cars than either U.S. or Japanese manufacturers were able to at the time.  “In BYD,” the article notes, “Buffett and Munger believed they had found a company with a shot at one day becoming the largest player in a global automobile market that was inevitably going electric.”

In 2008, Buffett told Fortune that he had originally wanted to purchase a 25% stake, but Chuanfu refused to release more than 10%. According to Buffett, ““This was a man who didn’t want to sell his company,” adding, “That was a good sign.”

The investment has proved to be “money well spent,” the article reports, noting that as the electric vehicle market has “exploded” in China, BYD has emerged as a major player, selling more than 130,000 electric passenger vehicles last year “as it competes for market share with rival EV makers like Wuling, NIO, and, of course, Tesla.”