Buffett Accelerates Cutting BYD Stakes, Cashing Out HK$780 Million in More Than a Week

TMTPost -- Legendary billionaire investor Warren Buffett is accelerating unwinding its long position in BYD Co., Ltd., China’s No.1 electric vehicle (EV) manufacturer.

Credit：BYD

Buffett’s Berkshire Hathaway sold 2,017,500 Hong Kong-listed BYD shares at an average price of HK$234.57apiece (US$30.04) on June19, according to a filing with the Stock Exchange of Hong Kong (HKEX) earlier this week. Following the sale, Berkshire’s stake in the Chinese EV company was down from 6.18% to 5.99%, representing sales of HK$473million ($60.61 million)worth of shares.

The sales suggested Berkshire cashed out more than HK$780 million in more than a wee. Another filling with HKEX showed it offloaded 1,347,500 BYD shares on June 11, fetching the proceeds of HK$311 million. Sales earlier this month is Berkshire’s first move since last October. The recent sales showcased the firm is stepping up stake reduction. The latest two disclosed sales dropped Berkshire’s stake by almost one percentage point in around a week, while it took the company seven months to reduce its stake to 6.9% from 7.98%.

As of this week, Berkshire has conducted fifteenth offloading in Hong Kong made public since August 2022, bringing it a total of about HK$36.15 billion by sales of approximate 159 million shares. The investment company disclosed on August 24 2022 about sales of 1.33 million shares, the first stake reduction since acquiring 225 million BYD shares for HK$8.00 each in September, 2008. The holding has been trimmed by 70% since first sale that reduced Berkshire’s holding in BYD to 19.97%. Prior to that sale, Berkshire held a 20.49% stake in BYD.

Buffett may plan to clear out all of his holdings in BYD and the stake reduction will accelerate once his company hold less than 5% stake, Chinese state-owned newspaper Securities Times cited industry analysts this week. The Hong Kong exchange requires larger shareholders to disclose sales when their resulting stakes fall below whole percentage numbers. Berkshire may cease disclosing BYD sales after its ownership stake falls below 5%.

As a long-term investor of BYD, Berkshire’s continuous offloading easily raises questions about the Chinese EV maker’s outlookamid the tariff threat, highlighting concerns of intense trade frictions.

Buffett called BYD “extraordinary” in an interview in Aprillast year, right after his company disclosed to lower its holdings from 11.13% to 10.9%. “We’ll find things to do with the money that I’ll feel better about,” the 93-year-old Chairman, CEO and Chief Investment Officer of Berkshire said.

At this year’s annual shareholders meeting in May, Buffett expressed his preference to investments in the U.S. "Our primary investments will always be in the United States," said Buffett when asked about Berkshire's appetite for increasing investments overseas, and in China specifically.

Berkshire’s first cut in BYD stake came as the European Union got ready for additional tariffs on Chinese electric vehicles (EVs). The European Commissionsaidon June 12that it has pre-disclosed the level of provisional countervailing duties it would impose on imports of BEVs from China, which would be introduced from July 4 if discussions with Chinese authorities do not result in an effective solution. The executive arm of the EU concluded through an anti-subsidy investigation that the BEV value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers.

If the abovementioned duties are materialized, the European Commission would impose additional duties on three sampled Chinese EV makers, on top of the ordinary BEV import duty of 10%. The additional individual duties would be 17.4% for BYD, 20% for Geely and 38.1% for SAIC. According to the statement, other BEV producers in China, which cooperated in the investigation but have not been sampled, would be subject to the following weighted average duty: 21%, while all other BEV producers in China would face an extra duty of 38.1% if they did not cooperate in the investigation.