In the investment world, Charlie Munger is well known as Warren Buffett’s highly successful right-hand man. The two are legends in the financial investment industry. But, naturally, Buffett gets the bulk of the praise and attention. There was one big investment that was reportedly outside the normal process for the duo, and that was Munger convincing Buffett to take a chance and invest in BYD when it was just getting rolling on its transition to EVs. Of course, BYD had a useful base as a battery producer, but many battery producers from that era have gone under or bet on the wrong technology, and BYD’s early EV models were nothing to write home about. The linchpin was that Munger was extremely impressed by the founder, CEO, and chairman of BYD, Wang Chuanfu, and convinced Buffett that it was worth taking a risk on him. (We also interviewed Wang Chuanfu — in 2016 and 2018 — and have long been deeply impressed with what he’s done at BYD, but perhaps with a little less conviction than Munger had early on about where he would take BYD next.)
Initially, Berkshire Hathaway invested $270 million into BYD. Munger says that’s worth about $8 billion or $9 billion today. “That’s a pretty good rate of return,” he added. Yes, I guess so. In fact, Munger thinks this is the biggest single contribution to Berkshire Hathaway that he’s ever made. “I have never helped do anything at Berkshire that was as good as BYD,” he said earlier this year.
That’s all well and good, and should bring no arguments or controversy, but Munger has also offered some fightin’ words up for Elon Musk and Tesla fans. Here are a couple more statements from Munger that bring the popular US EV brand and its head honcho into the discussion:
- “He can do things you can’t do,” Munger said a couple of weeks ago on the podcast Acquired. “He’s a fanatic that knows how to actually make things with his hands. He’s closer to ground zero in other words. The guy at BYD is better at actually making things than Elon is.”
- “BYD is so much ahead of Tesla in China. It’s almost ridiculous,” Munger said earlier this year.
Unsurprisingly, there’s also a history there. Buffett and Munger were invited to invest in Tesla at about the same time that they invested in BYD. They declined. Elon Musk tweeted in February 2023 that they could have had a lot of success with Tesla as well if they hadn’t declined. “Munger could’ve invested in Tesla at ~$200M valuation when I had lunch with him in late 2008.” Tesla’s market cap right now is $672.6 billion. “That’s a pretty good rate of return” is definitely something Munger could have repeated about investing in Tesla if they had done so.
While it’s common to talk about Tesla vs. BYD, I think it’s more appropriate to see them as loose complementary partners (for now). Together, they have driven most of the transition to electric cars. They have come at it from different angles, and are overlapping more and more as they grow and mature, but they have succeeded to a very similar degree. The world should be happy that we have them both.
Notably, Wang Chuanfu has his own impressive origin story. He’s the son of rice farmers but was orphaned as a child. He rose out of extreme poverty to become one of the most influential and successful people of our age. “The guy was a genius,” Munger said on the recent podcast. “He had a Ph.D. in engineering and he could look at somebody’s part in the morning…and in the afternoon he could make it. I’ve never seen anybody like that. He can do anything. He is a natural engineer and a get-it-done-type production executive, and that’s a big talent to have in one place.”
We often talk about Tesla when we talk about vertical integration, but BYD takes vertical integration to another level. It started out as a battery company. Now, it produces batteries, electric cars, semiconductor chips, and much more.
BYD is by far the world leader in plugin vehicle sales, and it’s now neck and neck with Tesla in terms of 100% electric vehicle (BEV) sales.
Build your dreams, they said, and Wang Chuanfu did.
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