The latest quarterly report from Berkshire Hathaway Energy, a subsidiary that directly held shares of the Chinese electric vehicle (EV) maker BYD listed in Hong Kong, has revealed a significant development. The report indicates a zero position in BYD, confirming a complete exit after a series of stake reductions that began in 2022. This strategic divestment aligns with Berkshire Hathaway's broader investment strategy, reflecting their assessment of the evolving market dynamics in the EV sector.
The decision to divest from BYD comes at a time when China's EV industry is grappling with slowing sales and shrinking profits. Concerns regarding oversupply have been amplified by criticisms from the United States and the European Union, who have accused China of flooding their markets with cheaper products. As a result, the industry is experiencing significant pressure, prompting the Chinese government to implement an anti-involution campaign aimed at curbing harmful competition by reducing excessive production capacity.
Despite the challenges, EV sales in China saw a year-on-year increase of 27 percent in August. However, this growth rate represents a slowdown compared to the 40 percent increase observed in the first half of the year. The shifting market dynamics have raised concerns about the sustainability of such growth, particularly for major players like BYD.
The market reaction to Berkshire Hathaway's exit from BYD was palpable. On Monday, BYD's shares fell by 3.4 percent, closing at HK$109.70, marking the largest decline in three weeks. This drop has reduced BYD's year-to-date gains to 23 percent, contrasting with the 31 percent increase seen in the Hang Seng Index. Additionally, BYD’s stock listed in Shenzhen experienced a 1 percent decline, dropping to 107.99 yuan, which further trimmed its year-to-date gain to 16 percent.
In response to Warren Buffett's exit, BYD highlighted that Berkshire Hathaway's stake in the company had fallen below 5 percent as of June of the previous year. This threshold is significant under Hong Kong exchange rules, as it eliminates the requirement for the company to disclose any further changes in holdings. This regulatory detail underscores the strategic implications of Berkshire's withdrawal from one of the leading players in the global EV market.
