Warren Buffett said this weekend that he admires Tesla CEO Elon Musk. And the CEO of Berkshire Hathaway believes that electric cars will bring about significant changes in the car market. But he doubts that any automaker will be able to take a dominant position.
“You’re going to see a change in cars, but you’re not going to see anyone owning the market because they’ve changed the car,” Buffett said this weekend at Berkshire Hathaway’s annual conference. investment legend and co-VP Charlie Munger, Share their thoughts about electric vehicles and the automotive industry in general during a question-and-answer session.
“The electric car is a long time coming, and this is a very interesting development,” Munger said. But, he added, “Right now it’s huge capital costs and huge risks – and I don’t like huge capital costs and huge risks.”
“Charlie and I have felt for a long time that the auto industry is very difficult,” said Buffett. “It’s just a business where you have a lot of competitors all over the world, and they’re not going away. And it seems like there are winners at any given time, but that doesn’t get you a permanent spot.”
In February, Musk answered a Twitter user’s question about what Berkshire Hathaway should invest in, writing“starts with a T…”
musk addedMunger could have invested in Tesla at a valuation of nearly $200 million when I had lunch with him in late 2008. Tesla’s market capitalization is now around $530 billion.
The Berkshire Hathaway conglomerate includes all kinds of companies — Duracell, Dairy Queen and Fruit of the Loom are among the brands under its umbrella — but Buffett and Munger have never been particularly enthusiastic about automakers. It owns shares of General Motors and one of the largest auto dealers in the United States, Berkshire Hathaway Automotive.
And in China, Berkshire Hathaway has invested in Tesla competitor BYD. Earlier this year, Munger said it was “almost ridiculous” how much BYD beat Tesla in China, and called BYD his best investment in Berkshire Hathaway. Musk unleashed a price war in China.
Musk has also lowered Tesla’s prices in the US, forcing competitors to follow suit. For example, this week Ford announced price cuts for the Mustang Mach-E, last year’s best-selling electric car not made by Tesla. This is the second time this year that Ford has cut costs after Tesla did.
Musk warned on April 19th Earnings call That he might be willing to accept zero profit for every car sold prompts a swift backlash from investors worried about a damaging race to the bottom.
Buffett expressed confidence in an automaker this weekend. “I would say Ferrari is in a special place,” he said, “but they only sell 11,000 or 12,000 cars a year.” According to Reuters, the Italian luxury sports car maker It reached 13,221 births in 2022.
Buffett added, “I think I know where Apple will be in 5 or 10 years,” but “I don’t know what the auto companies will be in 5 or 10.”
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