Berkshire Hathaway, Inc. (BRK.A), the investment conglomerate led by Warren Buffett, trimmed its stake in Chinese EV giant BYD Company Limited (BYDDF) to under 5% by divesting 1.4 million BYD shares last week in Hong Kong. Berkshire, after investing in a stake of 10% for $230 million in 2008, has trimmed its interest in BYD in recent months amid the challenges faced by the global EV sector. BYD surpassed Tesla, Inc. (TSLA) in Q4 2023 by selling 526,000 battery electric vehicles during the quarter compared to 484,000 for Tesla to become the best-selling EV brand in the world. Buffett’s decision to offload BYD shares does not seem to indicate fundamental challenges for the company since Berkshire has been selling many other big names in the recent past including Apple, Inc. (AAPL) and Bank of America Corporation (BAC) as well.
Understanding The Regression
Global EV sales have slowed down this year due to several reasons, including the reduction in subsidies in key markets such as China, global economic growth slowdown, inflationary pressures, and the lack of availability of mid-range options for consumers. EV sales growth is projected to decelerate to 20% this year from 35% last year amid these challenges. The elevated cost of EV batteries and the lack of charging infrastructure to support the widespread adoption of EVs are also reasons behind these lackluster growth expectations.
China, the world’s largest EV market, is expected to register just 10% YoY growth in EV sales to 7.5 million units this year, a notable slowdown from YoY growth of 25% reported in 2023. In Europe, where EVs have taken market share from combustion engine vehicles aggressively in the last five years, EV sales are expected to decelerate to 15% this year from 30% last year.
Word On The Street
Despite the recent struggles faced by the EV sector, Wall Street analysts remain bullish on the long-term outlook for EV stocks, including the likes of Tesla and BYD. Goldman Sachs analysts, for instance, project annual EV sales to reach 20 million by 2030 from 13 million last year. Morgan Stanley is also bullish on the long-term prospects for the EV sector as analysts believe AI integration and autonomous driving will boost the demand for EVs in the next five years. JP Morgan analysts believe regulatory support will drive the demand for EVs higher in the coming years despite near-term volatility. Strict emission regulations in China, Europe, and the U.S. are expected to be a major tailwind for EV stocks.
Dilantha DeSilva does not have positions in any of the companies mentioned. Stocks.News has positions in Tesla.
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Dilantha is a former buy-side equity analyst who now contributes to Seeking Alpha, GuruFocus, TipRanks, and ValueWalk. He is the founder of Beat Billions, a premium investment research subscription service on Seeking Alpha’s Marketplace. He has appeared on CNBC and Bloomberg to discuss stock markets and the global economy.