Warren Buffett Just Dumped His Stake in an EV Stock That Berkshire Hathaway Made 20x Gains On. Is the Stock Still a Buy?

Berkshire Hathaway has fully divested its long-held stake in Chinese EV giant BYD, an investment that generated approximately 2,000% returns since 2008. While BYD surpassed Tesla in 2024 annual revenue at $107 billion and holds 32% of China's EV market, the company now faces significant headwinds, reporting a 30% year-over-year profit decline and a 16% cut to its full-year delivery outlook. This slowdown is driven by intensifying competition and price wars in China and Europe, leading to an analyst downgrade and a neutral near-term outlook for the stock amidst broader industry challenges.

Analysis

Berkshire Hathaway's complete divestment from BYD marks the end of a highly profitable 14-year investment that yielded returns approaching 2,000%. This strategic exit, which Warren Buffett hinted at in 2023 by stating he could find better uses for the capital, appears prescient given BYD's recent performance deterioration. While BYD demonstrated significant operational strength by surpassing Tesla in annual revenue with $107 billion in 2024 and securing a dominant 32% of China's EV market, current fundamentals are showing clear signs of strain. The company has reported a 30% year-over-year decline in quarterly profits and slashed its full-year vehicle delivery outlook by a cumulative 16%. These negative trends are attributed to intense competition and escalating price wars in its core Chinese market, with similar pressures emerging in Europe, a key target for expansion. An Erste Group analyst recently downgraded the stock to Hold, citing negative pricing trends in the European EV sector where BYD's average vehicle price has decreased for eight consecutive quarters. With a valuation of approximately 15 times forward earnings, the stock is not priced for distress, but the significant industry-wide headwinds in both China and Europe cloud the near-term outlook.

Key Decisions for Investors

• Investors should view Berkshire Hathaway's full exit as a significant bearish signal from a long-term holder, warranting a reassessment of BYD's long-term competitive advantages amidst increasing industry saturation.
• Monitor BYD's upcoming quarterly reports for any stabilization in profit margins and vehicle delivery volumes, as the current 30% profit decline and 16% guidance cut indicate severe near-term pressure.
• Track average selling prices and market share developments in Europe, as success in this expansion market is critical to offsetting margin erosion and intense competition within China.
• Given the neutral valuation at 15x forward earnings combined with significant industry headwinds, a cautious or neutral stance is warranted; consider placing the stock on a watch list pending signs of improving pricing power and a less competitive market environment.