Warren Buffett Casts Doubt on Prospects of Tesla and Other U.S. EV Makers
Warren Buffett waxed lyrical about Tesla's Elon Musk and the transformative potential of electric vehicles in the auto market this weekend at Berkshire Hathaway's annual confab. Do not take that to mean he thinks any carmaker can pull consistently ahead of the field.
"It's interesting — the electric vehicle is going to be huge," Buffett's partner, Charlie Munger, said during their Q&A session. But Buffett and Munger also underscored that EVs come with big capital costs and big risks.
"For a long time, Charlie and I have known how tough the auto business is," Buffett commented. "It's a highly competitive industry with global participants who aren't going to go away. There may be periodic winners, but no one makes a lot of money in the end."
In February, Musk playfully suggested that the Berkshire Hathaway investment was on its way: "Starts with a T…" He posted about how Munger passed up the opportunity to invest in Tesla a dozen years ago, when it would have cost $200 million, saying today the market cap is roughly $530 billion.
While Berkshire Hathaway includes everything from Duracell and Dairy Queen, Buffett and Munger have historically been less than enamored with auto manufacturers—though they do own shares in General Motors and a
In China, Berkshire Hathaway has stakes in Tesla rival BYD, a company Munger spoke of as his best investment within the conglomerate. He said BYD was doing pretty well versus Tesla in China, and he credited Musk for kicking off price competition there.
In reaction, Tesla has reduced prices in the US. Rivals, including Ford, have responded with cuts. It is this sort of competitive dynamic, along with Musk's comments Monday that the company would be willing to accept zero profit per vehicle, that have led some investors to worry about an adverse pricing war.
Though Buffett had qualms with most car companies, he felt differently about Ferrari's market position—its yearly sales are only around 11,000 to 12,000 cars. Speaking about the general uncertainty that looms over the auto sector, Buffett juxtaposed that against his confidence in Apple's future direction versus these quirky paths that most traditional auto companies took.
