MW Warren Buffett's electric gold mine: BYD outruns Tesla

By Charlie Garcia

Berkshire Hathaway backed up the truck for shares of a Chinese EV maker. It's been a turbocharged ride.

An obscure battery-maker has become one of the world's fiercest EV giants - and a perfect fit for Buffett's Berkshire Hathaway.

Warren Buffett doesn't place bets - he makes investments. Big difference. Betting is what tourists do in Vegas. Investing? That's for grown-ups. Years ago, Buffett backed a Chinese electric-vehicle manufacturer you've probably never heard of, and now they're juicing batteries faster than you can pick a Netflix series to watch.

If that sounds improbable, remember: Buffett saw this coming back in September 2008. Berkshire Hathaway quietly bought 225 million shares of BYD (CN:002594) (HK:1211) (BYDDY) back then for about $230 million - almost 10% of the company. Fast-forward to today, and Berkshire's stake is worth an estimated $6 billion to $8 billion - roughly 25 to 30 times its original investment. That's no lucky break; it's the Oracle of Omaha at his finest.

In late March, BYD surpassed Tesla $(TSLA)$ in quarterly automotive revenue for the first time. This was no symbolic flourish, but an outright coup. This isn't a case of catching up. It's charging ahead. Buffett, meanwhile, recently reiterated his enthusiasm for BYD at Berkshire's 2024 annual meeting: "Charlie [Munger] twice pounded the table ... and said, 'Buy BYD.' He was right - big time."

But Buffett isn't all nostalgia and victory laps. After BYD's meteoric rise, Berkshire has been trimming its position since 2022, quietly sliding below 5% ownership by mid-2024. This isn't a broken romance. It's Buffett's textbook discipline. You don't cling to every winner forever - you lock in profits when the world finally sees what you've known all along.

That's not gambling. That's genius.

BYD hasn't simply improved batteries. The company has erased the last psychological roadblock between average drivers and electric adoption. People don't obsess over engineering; they obsess over convenience. Buffett understands human psychology better than most psychologists.

BYD's autonomous driving system comes standard on its vehicles. Tesla's does not.

But BYD's battery? Consider that the first act.

Enter Wang Chuanfu - China's Elon Musk, minus the social-media habit. Wang turned an obscure battery-maker into one of the planet's fiercest EV giants. Earlier this year, BYD launched "God's Eye," an autonomous-driving system straight out of sci-fi. And here's the kicker - it comes standard, even on their $9,500 Seagull hatchback.

Meanwhile, Tesla charges around $15,000 - or a $199 monthly subscription - for its Full Self-Driving software, currently stalled by Chinese regulators. While Musk fans wait, Wang's customers are already on the road, assisted and stress-free. This isn't luxury - it's common sense. Available today, not "coming soon."

BYD briefly faced pushback for bundling autonomous tech as a standard feature - critics worried it raised unrealistic safety expectations. But BYD quickly clarified their tech is driver-assistive, not fully autonomous. Panic defused and skepticism turned into consumer confidence overnight.

How does BYD do it? Two words: vertical integration. BYD controls every part of its supply chain.

How does BYD do it? Two words: vertical integration. From batteries to semiconductors to motors - even lithium mines themselves - BYD controls every part of its supply chain. Competitors beg suppliers for parts while BYD calmly flips switches in its own factories. In business terms, that's not a competitive edge - it's a nuclear advantage.

This vertical integration isn't merely operational brilliance - it's a bulletproof economic moat. Controlling lithium mines, battery production and semiconductor manufacturing insulates BYD from supplier price spikes, geopolitical upheaval, and supply-chain chaos. Combine that with disciplined financial management, solid cash flow and conservative debt - exactly the fiscal rigor Buffett demands - and you've got a perfect Buffett-style investment.

Then there's BYD's revolutionary Blade Battery - not just the safest EV battery tested but practically indestructible. In 2023, BYD cracked the global top 10 automakers. By 2024, it had jumped to sixth, breathing down Tesla's neck.

Margins matter too. BYD's gross margins of 20.6% don't just outpace Tesla; they surpass BMW (XE:BMW), Mercedes-Benz (XE:MBG), and Toyota (JP:7203) $(TM)$. Yet BYD's market cap sits at just one-fifth of Tesla's, despite nearly taking the global EV sales crown.

In January, Tesla's China sales slipped 11%; BYD's surged 48%. That's not a blip - it's a seismic shift. Chinese consumers aren't merely switching to electric - they're choosing smarter, safer, cheaper and faster.

Tesla's regulatory headaches in China aren't roadblocks - they're open doors for BYD to consolidate its leading market share.

Of course, investors must consider geopolitical tensions between the U.S. and China. Tariffs, regulations and diplomatic risks are very real. But for diversified investors, BYD provides a strategic hedge - exposure to high-growth markets backed by a Chinese government firmly committed to leading the global EV revolution. If your portfolio leans too heavily American, BYD is solid diversification.

This month, BYD raised $5.6 billion in Hong Kong - the second-largest flash equity sale ever in the region and the largest automotive financing in a decade. The company is using that capital to build a lead that competitors may never match.

Tesla's regulatory headaches in China aren't roadblocks - they're open doors for BYD to consolidate its leading market share. Last month, BYD shares soared to record highs as investors finally saw clearly what Buffett spotted years ago and Wang Chuanfu built piece by piece.

There are 60,000 publicly traded companies worldwide. America doesn't have a monopoly on brilliance or profit. Buffett knew this long before most investors, betting that BYD would become something special. Wang Chuanfu made that vision a reality.

Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more. Garcia does not own shares in any of the companies mentioned in this article.

More: BYD will beat Tesla two ways this quarter

Also read: Tesla and Elon Musk are in the eye of a storm. Will first-quarter deliveries provide some relief?

-Charlie Garcia

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 02, 2025 07:35 ET (11:35 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.