Autos

Are Warren Buffett's Car Stocks Still Cruising?

In 2008, Berkshire Hathaway Inc. (NYSE: BRK-B) subsidiary MidAmerican Energy invested $232 million in Chinese automaker BYD Co. Ltd. (BYDDF) in exchange for a 10% stake in the maker of both internal combustion engine (ICE) and electric vehicles (EVs). As of last week, Berkshire holds an 8.2% stake in the company, valued at roughly $6.75 billion based on Berkshire’s holdings as of March 31.

In 2010, Berkshire and Warren Buffett paid $222 million for a new position totaling 10 million shares of General Motors Co. (NYSE: GM). By July of last year, Buffett had amassed 80 million shares of GM stock. Since then, Buffett has pared his holdings in GM to 67 million shares. Even so, at the end of the second quarter, Buffett’s holdings in GM were valued at around $3.96 billion.

We will not find out until next month whether Buffett has bought or sold some of his stake in BYD or GM, but the odds are that both won’t change. Comparing the performance of the two investments since Buffett’s first purchase of GM stock, BYD’s share price has soared by more than 1,300% while GM’s has jumped by about 278%.

When BYD reported June sales earlier this week, the company said it sold nearly 50,000 vehicles last month, of which about 80% were EVs. Including ICE vehicles, sales were up 52.5% year over year and 10.2% month over month. The 40,116 EVs — or as China designates them, new energy vehicles (NEV) — represented a year-over-year increase of 207.1% and a jump of 26.6% month over month. ICE vehicle sales were down 50.7% year over year and down 28.5% month over month.

According to a report at CnEVPost, some analysts believe that BYD is going to dump its ICE production and build NEVs exclusively. BYD recently began selling vehicles based on a new plug-in hybrid (PHEV) platform that delivers approximately 62 miles per gallon. The new PHEV system has driven some 100,000 new orders, two-thirds more than in June of last year.

Will Buffett add more to his stake in BYD? It is the portfolio’s only investment that is based in China. Buffett may believe that Berkshire’s exposure to China through its holdings in Apple could be enough for now.

As for GM, Buffett has reduced his holdings in each of the past two quarters. A reasonable guess is that he will stand pat or boost his holdings by a smaller amount than the 7.6% cut he made during the March quarter. June quarter sales came in below estimates, due in part to supply chain constraints.