Ladies and gentlemen, fasten your seat belts, Warren Buffett, that venerable oracle of Omaha, has quietly exited his entire 17-year holding in BYD. What began in 2008 as a $230 million gambit has now drawn to a close.
Let me refresh your memory: Berkshire’s bet on BYD was often cast (in hushed voices among the cognoscenti) as a kind of “contrarian bet on China / anti-Tesla play.” After all, BYD had carved a niche in EVs and batteries, and many thought Buffett was hedging against the over-hyped Musk machine. Yet now, with Buffett pulling every share from the shelf, one must ask: did he finally detect a mirage?
It may all be due to the lack of profitability of PRC manufacturers, a problem that will lonely be exacerbated with the on going price war in the market…….But.
Buffett’s gradual trimming of the stake, beginning in earnest in 2022, was no secret. But for a long-term backer of that stature to wipe his position to zero well, it jolts the market’s confidence. Certainly, BYD’s growth has sputtered lately: profits slid, domestic sales declined for months, and management cut back its own targets.
Now, some voices (whispered in private equity lounges, perhaps) are muttering the unthinkable: was BYD in some way a Ponzi-style illusion? That is a serious charge, of course. To be clear: I’m not asserting it as fact. But ask yourself: when your longest, most faithful investor exits entirely, and silently, does that not set off alarm bells?
Of course, Buffett may have myriad reasons to disinvest: reallocating to higher prospective returns, risk rebalancing, geopolitical concerns, or simply having taken full, fat profits. Yet the optics are grim. The man who once admired BYD enough to trumpet it to the heavens has now walked away.
And in my usual style, I leave you with this: the greatest risk is not that BYD was a Ponzi scheme, it may not have been, but that we’ve mistaken flamboyant growth and hype for durable business underpinnings. And when the grand old investor disappears from the scene, perhaps that’s your cue to look a little harder at the building behind the shine.
