It is premature to declare the winners of the electric vehicle competition, Warren Buffett said on Saturday. There is simply too much uncertainty in the industry.
“You’ll see a change in vehicles, but you won’t see anyone owning the market because they’ve changed vehicles,” Buffett said at the Berkshire Hathaway (BRK-A, BRK-B) annual meeting.
In recent years, Tesla (TSLA) has dominated the US electric vehicle market. While Tesla still holds a strong hold in the market with 54.3% market share, traditional automakers such as General Motors (GM) and Ford (F) have also gradually begun to gain market share.
Competition has intensified as traditional automakers and new startups spend billions on producing electric vehicles, securing supply chains and infrastructure. Automakers, including Tesla, have signaled they are prepared to suffer margin squeezes from price cuts as they vie for market leadership.
Buffett alluded to Ford as a cautionary tale of just how unstable the auto industry can be: “Henry Ford looked like he owned the world with the Model T…and 20 years later they were losing power. money,” he said.
Berkshire Hathaway has a dealership group with more than 100 franchises representing 27 automakers in 10 states, primarily in Texas and Arizona. The conglomerate, which also owns the BNSF railroad, bought the Van Tuyl Group dealership chain in 2014.
Berkshire also owns about 50 million shares of General Motors, worth $1.68 billion in December 2022, but sold some of its GM shares in the second and third quarters of 2022.
But Buffett and his right-hand man Charlie Munger said they had no interest in venturing further into the auto business.
“Charlie (Munger) and I have long believed that the auto industry is just too tough,” Buffett said. “It’s just a business where you have a lot of global competitors, they’re not going away, and it looks like there will be winners at some point, but that doesn’t give you a permanent place.”
Munger agreed, adding that while electric vehicles are certainly on the rise, with that rise come significant costs.
“The electric vehicle is coming in full force, and it’s a very interesting development,” Munger said. “At the moment it imposes huge capital costs and huge risks, and I don’t like huge capital costs and huge risks.”
It’s better to identify opportunities with more certainty, Buffett explained.
“I think I know where Apple will be in 5 or 10 years,” he said, “and I don’t know what automakers will be in 5 or 10 years.”
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