Berkshire Hathaway
Buffett referred to Ford Motor Co.'s
Tesla is down as much as 21% in the past 12 months. As the EV market and makers like Tesla continue to struggle for growth, some retail investors have looked to the startups market. For example, Civilized Cycles launched on Wefunder and has seen substantial traction from retail investors.
Recent reports indicate that U.S. EV startups continue to burn through cash without showing tangible progress amid a challenging economic backdrop marked by declining EV demand. Thomas Hayes, chairman of hedge fund Great Hill Capital, expressed concern over companies that are losing money and have a low valuation, highlighting the vulnerability of EVs in this regard.
Even established players such as General Motors Co.
Tesla also faces challenges, including the need to reduce prices to maintain demand and the impact of raw material inflation on profit margins. Federal government subsidy plans under the Inflation Reduction Act could exacerbate these issues.
Berkshire Hathaway has extensive holdings in various industries, including a dealership group with over 100 franchises representing 27 automakers across 10 states. But Buffett and his trusted associate Charlie Munger have made it clear that they are not inclined to further expand their involvement in the auto business.
Buffett expressed their long-held belief that the auto industry is a formidable field, stating, "Charlie and I long have felt that the auto industry is just too tough. It's just a business where you've got a lot of worldwide competitors, they're not going to go away, and it looks like there are winners at any given time, but it doesn't get you a permanent place."
This sentiment resonates with their cautious approach to venturing deeper into the industry despite their current holdings, which include roughly 40 million shares in General Motors. This is down from the 50 million shares they owned in 2022.
Munger echoed Buffett's sentiment, acknowledging the significant rise of electric vehicles but emphasizing the associated capital costs and risks.
"The electric vehicle is coming big time, and that's a very interesting development," said. "At the moment, it's imposing huge capital costs and huge risks, and I don't like huge capital costs and huge risks."
Instead of embracing the automotive sector further, Buffett emphasized the importance of identifying opportunities with greater certainty. He contrasted his confidence in predicting Apple Inc.'s