Warren Buffett said this weekend he admires Tesla CEO Elon Musk. But the Berkshire Hathaway CEO is not confident that Tesla or any rival will be able to gain and maintain a strong position selling electric vehicles in America.
At Berkshire Hathaways annual conference this weekend, the investing legend and his partner, vice chairman Charlie Munger, shared their thoughts on EVs and the auto industry in general during a Q&A session.
The electric vehicle is coming big time, and thats a very interesting development, said Munger. But, he added, at the moment, its imposing huge capital costs and huge risksand I dont like huge capital costs and huge risks.
You will see a change in the vehicles, but you wont see anybody that owns the market because they changed the vehicle, Buffett added.
The Berkshire Hathaway conglomerate includes all kinds of companiesthe Duracell, Dairy Queen, and Fruit of the Loom brands are under its umbrellabut Buffett and Munger have never been especially enthusiastic about carmakers. It does own General Motors shares and one of the largest car dealers in the U.S., Berkshire Hathaway Automotive.
And in China, Berkshire Hathaway has invested in Tesla rival BYD. Earlier this year, Munger said its almost ridiculous how much BYD was beating Tesla in China, and he called BYD his best investment at Berkshire Hathaway. Musk responded to BYDs success by unleashing a price war in China.
Musk has also slashed Tesla prices in the U.S., forcing rivals to follow suit. Ford, for example, this week announced price cuts for the Mustang Mach-E, the bestselling EV last year not built by Tesla. That marked the second time this year that Ford cuts costs after Tesla did so.
Musk warned on an April 19 earnings call that he might be prepared to accept zero profit per vehicle sold, drawing swift backlash from investors worried about a damaging race to the bottom.
Charlie and I for long have felt that the auto industry is just too tough, Buffett said. Its just a business where youve got a lot of worldwide competitors, theyre not going to go away. And it looks like there are winners at any given time, but it doesnt get you a permanent place.
He noted one exception: I would say Ferrari is in a special place, but they only sell 11,000 or 12,000 cars a year. According to Reuters, the Italian luxury sports car maker reached 13,221 deliveries in a strong 2022.
I think I know where Apples going to be in 5 or 10 years, Buffett added, but I dont know what the car companies are going to be in 5 or 10 years.
