BYD share price walloped by Warren Buffett

BYD, China’s leading electric vehicle (EV) maker and rechargeable battery producer, is on a roll. In the first seven months of 2023, the Group sold 1.5 million new energy vehicles, an increase of 89% year-on-year. According to data from the China Automobile Association, in the first half of 2023, the market share of the Group’s new energy vehicles further expanded to 33.5%, an increase of 6.5 percentage points compared with 2022. Despite so, the strong business performance has not been reflected in BYD share price. Why is this so?

The 52-week low of BYD share price was HK$161.70 while the 52-week high was HK$280. The volatility of BYD share price could be due to the sell-offs by legendary investor Warren Buffett. Back in 2008, Warren Buffett acquired 225 million of BYD shares for HK$1.8 billion (US$230 million). That worked out to be HK$8 per share. Given the current BYD share price, Warran Buffett’s profit would have been at least 40 times of his initial investment on BYD!

Warren Buffett’s investment in BYD in 2008 demonstrated his vision and brilliant foresight. Let’s be clear about this. In 2008, we had the global financial crisis roiling the stock market upside down. Under that sort of massive market uncertainties, it was incredible that Warren Buffett would invest so much money in the China EV maker. What is even more amazing is that Warren Buffett has the patience to hold BYD shares for more than 14 long years before he started to take profit in 2022.

Since August 2022, Warren Buffett started to take profit and trimmed his shareholdings in BYD from 225 million shares to 98.6 million as at 30 June 2023. The series of sell-offs by Warren Buffett caused BYD share price to fall from HK$320 in July 2022 to the current HK$247 as at 8 September 2023. The share sales of Warren Buffett came at a time of increased geopolitical tension between US and China, as well as a slowing China economy. Interestingly, Warren Buffett claimed that the key reason for his selling was to avoid competing against Elon Musk’s Tesla.

It should be highlighted that Warren Buffett is a contrarian investor whose investment approach is to buy low and sell high. Given the current BYD share price, it would obviously make sense for the venerable investor to cash in and laugh all the way to the bank. For this reason, his sell-offs should not be an indication of business fundamental issues at BYD.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am not vested in BYD shares at the moment. Whether BYD share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

BYD share price to win price war?

Since 2022, BYD has stopped selling oil-fueled vehicles, signaling its ambition to be the world largest electric vehicle. Its’ zealous in gaining market share in the EV sector saw the automaker closing the gap to become the world’ second largest EV maker in Q2 of 2023, behind market leader Tesla.

To take on Tesla, China’s BYD is launching an aggressive price war against Tesla. BYD Seal series model (the sports version) is purportedly being sold at much cheaper than Tesla Model 3. The price war initiated by BYD was in response to the price war started by Tesla in 2022. The move by Tesla in 2022 was aimed at gaining market share in China and had hit Japanese, European and other US EV makers.

The price war by BYD is starting to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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