US Seems Aware of Tariff Risks on European Popular Electric Cars
No Sales Disclosure Required for Stakes Below 5%
'Investment genius' Warren Buffett has once again sold shares of Chinese electric vehicle maker BYD.
According to documents submitted by Berkshire Hathaway to the Hong Kong Stock Exchange on the 25th (local time), the company reduced its stake in BYD to 5.99% on the 19th. Earlier, on the 17th, Berkshire Hathaway also sold 1.35 million BYD shares worth about $40 million in a large-scale sale, lowering its stake from 7.02% to 6.9%. The Hong Kong financial authorities require disclosure whenever a major shareholder's stake decreases. However, if Berkshire Hathaway's stake in BYD falls below 5%, it is exempt from the obligation to disclose sales.
The background to Berkshire Hathaway reducing its stake in BYD is interpreted as being related to the increase in tariffs on Chinese electric vehicles by the US and Europe. CNN noted that Berkshire Hathaway's large-scale sale of BYD shares last week for the first time in 10 months "came amid rising global trade tensions surrounding China's cheap electric vehicles," adding that "thanks to massive government subsidies, China has become a dominant player in the electric vehicle market, but the possibility of a trade war with Western powers has also increased." The Biden administration significantly raised tariffs on Chinese electric vehicle imports from the previous 25% to 100% in May. Europe also plans to impose additional provisional tariffs ranging from 17.4 to 38.1 percentage points on top of the existing 10% tariff.
Berkshire Hathaway's investment in BYD began in 2008. At that time, the company invested $230 million to acquire 225 million BYD shares, securing a 10% stake. It is known that the late Charlie Munger, then Vice Chairman of Berkshire Hathaway, led the BYD investment. Subsequently, in June 2022, BYD's stock price surged to nearly 41 times the price Berkshire Hathaway originally paid, becoming one of the most successful investment cases in the company's history. At Berkshire Hathaway's annual shareholders meeting last month, Buffett acknowledged Munger's judgment on the BYD investment as "was right, big-time."
BYD was founded in 1995 by Wang Chuanfu, a Chinese chemist. Starting as a rechargeable battery manufacturer, BYD surpassed Tesla last year to become the world's largest electric vehicle seller. Its stock price has risen about 30% so far this year.
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