BYD dominates China’s electric car market. But its stock is slumping after Warren Buffett sells shares for the first time in 14 years

On Friday, Berkshire Hathaway disclosed that it sold 1.72 million shares in BYD, bringing its stake in the carmaker down to 18.87%. That followed a Tuesday disclosure that Berkshire had sold 1.33 million BYD shares, the first time the company had trimmed its stake in 14 years. 

BYD shares are down 18.1% since last Tuesday, when Berkshire Hathaway first disclosed its share sale. The broader Hang Seng Index is down 3.6% over the same period.

Investors have been worried about a Buffett exit from BYD since mid-July, when a 20.49% stake in the carmaker—equal in size to Berkshire Hathaway’s holding—first appeared in Hong Kong’s clearing system, where shares must be entered before they can be traded. The data entry led to an almost 12% plunge in BYD shares the following day.

But Buffett’s disclosures last week are leading some analysts to expect the worst. “We do expect Berkshire Hathaway to completely exit its position,” Kelvin Lau, Head of Auto, Transportation & Industrial Research at Daiwa Capital Markets Hong Kong, told Bloomberg.

Buffett has been one of BYD’s biggest backers, purchasing 225 million shares in the electric carmaker for $230 million in 2008. Buffett’s longtime business partner Charlie Munger told Fortunein 2009 that BYD founder Wang Chuanfu was “a combination of Thomas Edison and Jack Welch.” Buffett has sold 3.05 million of those shares since last Tuesday. 

At Monday’s prices, Berkshire Hathaway’s remaining stake in the company is still worth about $6 billion.

BYD growth

Buffett’s share sales are dragging down shares in BYD even as the Chinese carmaker is reporting stellar growth for the year thus far.

BYD dominates China’s new energy vehicle (NEV) market, a category that includes plug-in hybrids and battery-powered vehicles. According to data from the China Passenger Car Association, BYD was the top seller of NEVs in China in the first seven months of 2022, with 29% market share, far ahead of Wuling (a joint venture between two Chinese automakers and General Motors) with its 9% share, and Tesla’s 7% share.

BYD’s battery business is also growing. The company took second place in global July sales of EV batteries, overtaking Korean battery maker LG Energy Solution, according to a report released Monday by South Korean renewable technology firm SNE Research. BYD still significantly lags market leader Contemporary Amperex Technology, however.

On Aug. 29, BYD reported that it made $521 million in profit in the first half of 2022, triple what it reported in the first six months of 2021. The electric carmaker said it sold more cars between January and July 2022 than the entirety of 2020 and 2021 combined. 

25% of new cars sold in China in July were NEVs, according to the China Passenger Car Association. The group also forecasts that 6 million NEVs will be sold in China in 2022, twice the amount sold in 2021.