Comment by ralph84
20 hours ago
Auto manufacturing is low margin and capital intensive. BYD is valued as an auto manufacturer. Tesla is not.
Even all of that aside, the idea that foreign investors will be allowed to meaningfully participate in the upside of Chinese companies is questionable. Every Chinese company is one recapitalization away from zeroing out the common stock owned by foreigners. What are they gonna do, sue in Chinese court?
For quite some time, Warren Buffett was a BYD investor via Berkshire Hathaway. If you tried to get into EV stocks after the Tesla exuberance started, you were already mostly too late.
> The filing by Berkshire’s energy subsidiary recorded the value of its BYD investment as zero as of the end of March, down from $415 million at the end of 2024.
> Buffett’s company began investing in Shenzhen-based BYD in 2008, when it paid $230 million for about 225 million shares, equivalent to a 10% stake at the time.
> It began selling those shares in 2022 after BYD’s share price had risen more than twentyfold.
Warren Buffett’s fund exits BYD after a 17-year investment that grew over 20-fold in value - https://www.cnn.com/2025/09/22/investing/warren-buffet-berks... - September 22nd, 2025
This is fascinating, because from what I've heard, Warren Buffett did not favor tech stocks. Does anyone know what gave Buffett the faith that this company was a real deal?
It's a car and battery company, isn't it? Framing it as a tech company is a bit weird, but I guess Tesla did the same.
Buffett didn't love automobile stocks either, but Berkshire Hathaway held General Motors from 2012 to 2023.
I think this was mostly a Munger pet investment, he had an extremely high opinion about the CEO and could see he was delivering on his goals one after another.
It was Charlie Munger who became enthusiastic about BYD after learning about it from investor Li Lu, leading him to convince Buffett to make Berkshire Hathaway's $230 million investment in 2008.
Maybe he was more afraid of software dominated stocks?
BYD is at heart an automobile manufacturer and so maybe he felt more confident evaluating it using his normal tools.
Yes the circumstances are well known. Li Liu convinced Munger and Munger talked to Buffett.
Berkshire was never tech investor. They looked for solid manufacturing with good price and potential to scale like manufacturing. Not everything is tech and you can still grow without being tech.
I remember vaguely an interview about it and he said he could understand the business and what was driving the industry and the technology.
I think he said something about equivalent of selling shovels to miners in a boom, that PV was going to need storage etc.
They “just” were a battery company then. Is that considered tech?
He owns the largest railroad company in US. That’s no less “tech” than batteries, motors and other EV car bits.
Munger believed in the founder from the very early days before it was a car company.
That investment predates Xi Jinping's leadership.
> BYD is valued as an auto manufacturer. Tesla is not.
This in no way addresses the accusation that Teslas valuation is built on nothing. BYD also has self driving software. So what exactly does Tesla have that is not cars and batteries?
The ludicrous humanoid robots with dubious use cases? That’s not it either because the stock was absurdly high before that was a thing.
I have never seen a better example of how arbitrary and irrational markets are than Teslas valuation.
> Every Chinese company is one recapitalization away from zeroing out the common stock owned by foreigners.
But in practice, wouldn't such an event on X large Chinese company have a cascade effect on stock values of all other Chinese companies?
Maybe, but China might not care too much.
They have precedence for cutting down their tech giants and their tuition industry recently.
Isn't BYD a VIE? Most "internet" (ie tech) companies in China cannot legally be owned by foreigners. And what you get is some proxy based in the Cayman Islands that is circumventing Chinese law. Not something I'd touch with a ten foot pole.
The VIE structure has been officially ratified by the highest levels of regulators in China. It does not circumvent Chinese law.
> What are they gonna do, sue in Chinese court?
If your hypothetical happens, yes. China has been working hard to turn domestic investment away from housing. A trustworthy domestic stock market is key.
And are they making progress? Genuine question, I don't know much about China.
> are they making progress?
* The Shanghai and Hong Kong stock market seems to have improved regulatory enforcement. I have no way of measuring this...just stories from others.
* Over the past 10 years the China gov pressed on with building more housing in part to dilute value. Each year they have warned that houses are for living, not speculation. Last year, they dumped a huge amount of cheap lending into the market to provide movement...warning this is the last step...a month ago the 2026 gov priorities list removed protecting the housing market...first time in modern history. Expectation is the next two years will see realized losses in property. It would be a huge mistake if the gov hasn't ensured regulatory enforcement of other segments have not reached maturity for the retail investor. We'll see...
* As for civil courts, over the past 20 years I've run into quite a few stories from friends and business colleagues that needed to go to China court. The stories are similar to what you may hear in the US. No one suggested the court/process itself was dodgy/unfair.
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> Every Chinese company is one recapitalization away from zeroing out the common stock owned by foreigners
See TikTok as an example.
The future of the Chinese economy depends on being able to access the global capital markets, which means that by extension, its future depends on foreign investors being demonstrably "allowed to meaningfully participate in the upside of Chinese companies".
Funnily enough, the future of the Chinese economy depends on being able to access their local market. The chinese people save too much and aren't buying their own products
You are right that getting Chinese households to invest in the domestic (Shenzhen, Shanghai, Hong Kong) stock market is also a key goal that they're rolling out incentives for.
> The chinese people save too much and aren't buying their own products
Nonsense.
Total Retail Sales of Consumer Goods went up 4.6% in the first 11 months of 2025. That is the number with spending on automobiles excluded. A total of 24 million cars were sold in China in 2025 with vast majority being Chinese brands. If 24 million car purchases a year is "aren't buying their own products", then car industry doesn't exist in the US.
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