charlie munger on Tesla and BYD

Berkshire Hathaway vice chairman Charlie Munger has said that China’s BYD was his best investment. He also took a swipe at Tesla (NYSE: TSLA) and said that said BYD is way ahead of the company in China.

Notably, last year BYD became the biggest NEV (new energy vehicle) seller. However, Tesla is still the market leader when it comes to BEVs (battery electric vehicles).

At Daily Journal’s virtual annual yesterday, Munger said “I have never helped do anything at Berkshire [Hathaway] that was as good as BYD and I only did it once.”

Berkshire bought BYD shares in 2008 amid the Global Financial Crisis. It turned out to be a good bet and the stock has gained 7x over the last decade. That said, the returns pale in front of Tesla which soared 740% in 2020 alone.

The Elon Musk-run company added another 50% to its market cap in 2021 but lost 65% in 2022. However, this year, TSLA stock is the top S&P 500 performer. There is a guide on how to buy Tesla stock.

Charlie Munger on Tesla

In November last year, Munger praised Musk and termed Tesla as a “minor miracle” in the automotive industry. He said that he was “surprised” at the company’s success.

Not many automakers as well as analysts gave the company much chance until about four years back. Before Q3 2019, Tesla was barely profitable in a handful of quarters. It was delivering very few cars, and markets doubted whether the company can achieve scale.

However, Tesla delivered 1.4 million cars in 2022 and expects to sell 1.8 million EVs in 2023.

Meanwhile, Munger commended BYD and said “Tesla last year reduced its prices in China twice. BYD increased its prices. We are direct competitors. BYD is so much ahead of Tesla in China … it’s almost ridiculous.”

Munger however made it clear that he won’t buy Tesla stock and would not short it either. Shorting Tesla has anyways been a risky exercise and bears learned it the hard way in 2020 and 2021.

Musk Also Praised Chinese EV Companies

To be sure, even Musk praised Chinese EV companies during the company’s Q4 2022 earnings call.

He said, “we have a lot of respect for the car companies in China. They are the most competitive in the world. That is our experience.”

He added that the Chinese market is “most competitive.” He also said, “if I would have guessed, there are probably some company out of China as the most likely to be second to Tesla.”

Ford CEO Jim Farley also echoed similar views during the Q4 2022 earnings call. He said, “I don’t think you can be globally successful in the EV business if you don’t compete with the Chinese.”

Chinese EV companies like NIO and Xpeng Motors have already entered China. NIO has said that eventually, it would also enter the US market which is the world’s most profitable automotive market. There is a guide on how to buy NIO stock.

Employees Charge Tesla with Wrongful Termination

Coming back to Tesla, the company has opposed unionization efforts in the past. Now, it has terminated some employees in Buffalo, New York. The company took the decision a day after employees working on its Autopilot software announced a campaign for unionization.

The employees have accused Tesla of wrongful termination and said that they were fired simply because they wanted to form a union.

Tesla’s Autopilot and its FSD (full-self driving) version have anyways been in controversy. This year, Dawn Project released a 30-second commercial during the Super Bowl calling out Tesla for deceptive marketing.

The video shows a Tesla Model 3 allegedly on FSD and proclaims “Tesla Full Self-Driving will run down a child in a school crosswalk, swerve into oncoming traffic, hit a baby in a stroller, go straight past stopped school buses, ignore do not enter signs and even drive on the wrong side of the road.”

Meanwhile, despite controversies, Tesla stock has more than doubled from its 2023 lows. Markets next look forward to the company’s Investor Day on March 1 where it might announce a new lower-priced electric car.

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