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Missed opportunities?

Tesla is one of the most volatile names in the market. While shares are down nearly 30% year to date, they’re up a whopping 992% over the last five years.

Buffett hasn’t invested in Tesla, but he holds Musk in high regard. He called him “a brilliant, brilliant guy” at Berkshire’s annual shareholders meeting in 2023.

Buffett also noted, “We don't want to compete with Elon in a lot of things.”

Buffett’s late right-hand man, Charlie Munger, concurred. “We don’t want that much failure,” he said.

Still, in a post on X last year, Musk revealed that Munger had the chance to invest in Tesla but chose not to, potentially missing out on substantial profits.

“Munger could’ve invested in Tesla at ~$200M valuation when I had lunch with him in late 2008,” he wrote.

To put things in perspective, Tesla now commands a market cap of over $540 billion.

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Still in the EV game

To be sure, Buffett hasn't entirely sidestepped the EV race.

Chinese EV manufacturer BYD has been a part of investing legend Warren Buffett's portfolio for more than a decade.

In 2008, Berkshire Hathaway acquired 225 million shares of BYD for $232 million, a move that proved to be highly lucrative. By the end of 2020, as stated in Berkshire’s shareholder letter, their stake was valued at approximately $5.9 billion.

Although Buffett later began reducing his stake in BYD, an October 2023 stock exchange filing reported on by Reuters revealed that Berkshire still held a sizable 7.98% stake in the company.

In the fourth quarter of 2023, BYD’s EV sales reached 526,409 vehicles, overtaking Tesla's deliveries of 484,507 EVs, according to Reuters, and displacing it as the top EV manufacturer globally.

Musk has acknowledged the competitive threat posed by Chinese automakers.

In January, he said that without trade barriers, Chinese car companies “will pretty much demolish most other companies in the world.”

Tesla insurance?

In this year’s Berkshire shareholders meeting, Buffett did comment on Tesla, but it was in response to a question on how Tesla’s autonomous driving technology might reduce accidents, potentially affecting the business of Geico, an auto insurance company owned by Berkshire.

“If accidents get reduced by 50%, it's going to be good for society and it's going to be bad for insurance companies' volume. But good for society is what we're looking for,” Buffett said.

Ajit Jain, vice chairman of insurance operations at Berkshire Hathaway, added that while the number of accidents might decrease as a result of autonomous driving technology, the repair cost per accident could be substantially higher.

“If you multiply the number of accidents times the cost of each accident, I'm not sure that total number has come down as much as Tesla would like us to believe,” he explained.

Jain also remarked on Tesla’s own ventures into the insurance industry.

“Tesla has been going with the idea of writing insurance directly or indirectly, and so far it hasn’t really been much of a success.”

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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