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Why Charlie Munger BETS on BYD and NOT TESLA | Collection: Charlie Munger #276



A question from Stephen Spencer, he’s curious why Mr. Munger prefers an investment in BYD to Tesla.


Well, that’s easy. Tesla last year reduced its prices in China twice. BYD increased its prices. We’re direct competitors. We’re so much ahead of BYD — I mean, BYD is so much ahead of Tesla in China. It’s like — it’s just — it’s almost ridiculous.

And if you look at BYD, which most of you never heard of, if you count all the manufacturing space they have in China to make cars, it would amount to a big percentage of what we have in Manhattan Island. And nobody ever heard of them a few years ago.


All right. Let me jump to another question. This one comes from Michael Assetto who says, did the — this is with regards to some movement at Berkshire, some sales of Berkshire’s stake holdings. "Did the sale of BYD and Taiwan Semi shares have anything to do with the relations between the United States and China? Or was it for purely economic reasons?"


Well, BYD is talking about 50x earnings. That is a very high price. On the other hand, they’re likely to have increased their auto sales by another 50% this year. So it’s — we sold a part of ours, by the way, years ago — not years, about a year ago at a much higher price than they’re selling for now.

And no, we’re not a mini Berkshire. We’re not going to have a big correlation between us and what Berkshire does. And you could understand why somebody will sell Berkshire’s — BYD stock at 50x earnings, at the current price of BYD stock, a little BYD is worth more than the entire Mercedes Corporation, market capitalization. So it’s not a cheap stock.

On the other hand, it’s a very remarkable company.

And by the way, I want to tell people the great contribution I made to the success of BYD. We got into it through Li Lu, and there was a little company that knocked off the Japanese cellphones. And the Chairman of this company was a genius, say, I’ll buy a bankrupt, a little crappy auto plant and go to the auto business from dead scratch when he’s making cell phones little tiny nothing company.

And both Li Lu and I tried talking about it. Please don’t do this dumb thing. You get your head handed to you in the auto business, little BYD and so forth. Well, last year, they made more than $2 billion in the auto business from that standing start at 0. It’s unheard of.

But Li Lu and I deserve all the credit because we tried to get him — we tried to talk about and doing what works so well. (Laughter) Which shows that there’s some accident in life. (Laughter)



[YAPSS Takeaway]

Sell your stocks if you believe it is overvalued.

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