Why Did Warren Buffett Invest in BYD in the First Place?
Back in 2008, Warren Buffett’s Berkshire Hathaway made a move that left many scratching their heads: investing HK$1.8 billion (about $231.7 million) in a then-obscure Chinese automaker called BYD. At the time, BYD was hardly a household name outside China. So why did one of the world’s most legendary investors take such a bold leap?
The answer lies in Buffett’s knack for spotting undervalued companies with massive growth potential. Charlie Munger, Buffett’s longtime partner, was particularly impressed by BYD’s founder, Wang Chuanfu, and the company’s early push into electric vehicles and battery technology. While the Western world was still warming up to the idea of EVs, BYD was already building them. It was a classic Buffett move: buy early, buy cheap, and hold tight.
How Much Did Berkshire Hathaway’s Bet on BYD Pay Off?
Let’s talk numbers, because they’re staggering. When Berkshire snapped up 225 million BYD shares at HK$8 each, it was a classic value play. Fast forward seventeen years, and BYD’s shares had skyrocketed by nearly 3,900%. At its peak, Berkshire’s stake was worth around $7.7 billion—a return that would make any investor’s jaw drop.
While the exact profit figure isn’t public, it’s safe to say the gain was measured in billions. That’s not just a good investment; it’s the stuff of legend. This kind of windfall doesn’t happen every day, even for Buffett. It’s a textbook example of the power of patience and conviction in investing.
Why Did Berkshire Hathaway Decide to Sell Its BYD Stake?
After nearly two decades, Berkshire Hathaway has now fully exited its BYD position. The process wasn’t sudden; it started quietly in 2022, with the company selling off shares in 15 separate rounds. By the time the last share was sold, the market had already been watching closely.
So, why walk away from such a winning bet? For Buffett, it’s all about discipline. He’s famous for saying you should be “fearful when others are greedy and greedy when others are fearful.” With BYD’s valuation soaring and competition in the EV space intensifying, Berkshire likely saw this as a prudent time to lock in gains and redeploy capital elsewhere. It’s a reminder that even the best investments aren’t forever.
How Has BYD Changed Since That Original Investment?
The BYD of 2024 is a far cry from the scrappy upstart Buffett first backed. Last year, BYD sold a whopping 4.27 million vehicles worldwide, including 1.76 million battery-electric models and 2.49 million plug-in hybrids. That’s not just impressive—it’s industry-defining. For context, BYD now regularly challenges Tesla for the title of world’s largest EV maker.
But it hasn’t all been smooth sailing. This year, BYD had to trim its ambitious sales forecast from 5.5 million vehicles down to 4.6 million, citing tougher competition and a cooling Chinese market. Still, those numbers would make most global automakers green with envy.
What Does Buffett’s Exit Mean for BYD and Its Investors?
When news broke of Berkshire’s final divestment, BYD’s shares slipped 3.4%—a sign of just how closely the market watches Buffett’s moves. But does his exit spell trouble for BYD? Not necessarily.
BYD’s management responded with gratitude, emphasizing that buying and selling are natural parts of investing. Li Yunfei, the company’s branding and PR chief, thanked Buffett and Munger for their long-term support, noting that such investments helped BYD become a global powerhouse. The company’s fundamentals remain strong, and its innovation pipeline is robust. For long-term investors, the story isn’t over.
What Can Everyday Investors Learn from the BYD-Buffett Story?
There’s a lot to unpack here for anyone looking to sharpen their investment game. First, the value of patience: Buffett’s 17-year hold is a masterclass in letting winners run. Second, the importance of conviction—backing a company when it’s still under the radar can yield outsized returns if your thesis is right. And finally, knowing when to exit. Even the best investments have a shelf life, and locking in gains is just as important as spotting opportunities.
The big takeaway? Investing isn’t about perfection—it’s about smarter adjustments. Start with one change this week, and you’ll likely spot the difference by month’s end.