Charlie Munger says BYD was his best investment at Berkshire Hathaway—it’s ‘almost ridiculous’ how much it’s beating Elon Musk’s Tesla

“I have never helped do anything at Berkshire that was as good as BYD,” Munger said Wednesday during the annual meeting at the Daily Journal Corp., where Munger serves as a director.

Munger praised BYD’s dominance of China’s electric vehicle market. “BYD is so much ahead of Tesla in China,” he said. “It’s almost ridiculous.” 

China’s middle-income consumers are flocking to BYD models selling between $14,500 and $29,000, instead of more expensive offerings from competitors like Tesla and Xpeng.

BYD delivered 1.86 million cars in 2022, three times what it sold in 2021, and enough to make it the world’s top-selling electric-car maker (although its sales include both hybrids and fully-electric vehicles). Tesla delivered 1.3 million cars globally in 2022.

Munger pointed out that BYD had increased the price of some of its more popular models, while Tesla had to offer discounts for its cars. Expiring consumer subsidies for electric vehicles may be pushing car companies to slash prices to keep customers.

BYD recently estimated that it would make between $2.2 billion and $2.4 billion in net profit for 2022, which would represent an almost 1,200% increase from its net profit for 2021. BYD also plans to expand in Japan and Europe.

“It’s incredible what’s happened,” Munger said. “Nobody had ever heard of [BYD] a few years ago.”

When did Berkshire Hathaway invest in BYD?

Berkshire Hathaway purchased 225 million shares in BYD in 2008 for $230 million. Munger was key to Buffett and Berkshire Hathaway’s investment in BYD, calling Wang Chuanfu, the company’s CEO, a “combination of Thomas Edison and Jack Welch” in a 2009 interview with Fortune.

The value of Berkshire Hathaway’s stake in BYD has boomed since that investment. At the company’s peak share price last June, Berkshire Hathaway’s stake was worth $9.5 billion. (Shares in BYD have fallen about 30% since then.)

Munger downplayed his involvement in BYD’s success on Wednesday. “We tried to talk [Wang] out of doing what worked so well, which shows that there’s some accident in life,” he said. 

Berkshire Hathaway has trimmed its BYD stake since last summer, dropping from 20.47% in early August down to 11.87% now, following an additional share sale reported last week. The sales have netted Berkshire Hathaway around $2.6 billion, according to calculations by the South China Morning Post. 

Experts see Berkshire Hathaway’s selling of BYD shares as in line with Warren Buffett’s philosophy of value investing, or buying undervalued shares and holding them until the market values them properly. 

Munger echoed that sentiment on Wednesday. “At the current price of BYD stock, a little BYD is worth more than the entire Mercedes corporation,” he said. BYD has a market cap of $107 billion, while Mercedes Benz currently has a market cap of $83.8 billion. “It’s not a cheap stock,” he said.

At current prices, Berkshire Hathaway’s remaining stake in BYD is worth around $3.9 billion.

Correction, Feb. 16, 2023: A previous version of this article misstated the market capitalization of the Mercedes-Benz Group.