Sou Hu Cai Jing·2025-09-27 12:31Core Viewpoint - Warren Buffett's decision to completely divest from BYD after 17 years reflects a significant shift in investment strategy and highlights the challenges facing the electric vehicle (EV) industry, particularly in terms of valuation and competition [1][4][7]. Investment History - Buffett's investment in BYD began in 2008 with a $230 million purchase of 225 million H-shares, representing a 9.89% stake, largely influenced by Charlie Munger's recommendation [1][3]. - The investment yielded a remarkable return of 3,890% by the time of divestment, with BYD's stock price increasing from approximately HKD 8 in 2008 to a peak of HKD 324 in October 2021 [1]. Reasons for Divestment - The divestment was not abrupt; it began with a gradual reduction of shares starting in August 2022, culminating in a complete exit by the first quarter of 2025 [3]. - Buffett's preference for undervalued stocks led to the decision, as BYD's dynamic P/E ratio was around 30, exceeding Tesla's 20, indicating that BYD's stock may have surpassed its intrinsic value [4][5]. - The evolving competitive landscape in the global automotive market, with over 200 domestic EV manufacturers and aggressive pricing strategies from competitors like Tesla, contributed to the reassessment of BYD's investment risk [5][7]. Financial Performance - BYD reported a revenue of CNY 371.28 billion in the first half of 2025, a 23.3% year-on-year increase, but faced a net profit decline of 29.87% in Q2, with a gross margin of 16.3% showing a downward trend [7][8]. - The company's asset-liability ratio stood at 71.08%, indicating significant financial pressure and challenges in cash flow management [7]. Market Position and Competition - BYD, as the largest EV manufacturer globally, faces increasing competition from companies like Tesla, NIO, and Xpeng, which poses a threat to its market position [9][10]. - The domestic EV market penetration has reached 40.9%, with predictions suggesting that monthly sales of EVs may soon surpass those of traditional fuel vehicles, although growth rates are slowing [11][12]. - The shift from high growth to a more competitive environment may lead to intensified price wars, impacting profitability and market dynamics [12][15]. Future Outlook - The exit of Buffett marks the end of an era for BYD, necessitating the company to prove its leadership in the market while continuing to invest in R&D to maintain its technological edge [15]. - The ongoing transition in the EV sector suggests that the challenges and competition will only intensify, requiring strategic adaptations from leading firms like BYD [15].