In the realm of investments, Charlie Munger is renowned as the highly successful right-hand man of Warren Buffett, both considered legends in the financial industry. While Buffett typically receives the majority of praise and attention, there is one notable instance where Munger played a crucial role in deviating from the usual investment process. This exceptional case involved Munger persuading Buffett to venture into BYD when the company was in the early stages of transitioning to electric vehicles (EVs).
Despite BYD having a solid foundation as a battery producer, Munger took note of the potential risks, as other battery producers from that era faced challenges or made misguided technology bets. Even though BYD's early EV models weren't particularly noteworthy, Munger was deeply impressed by the founder, CEO, and chairman of BYD, Wang Chuanfu. Munger's conviction in Wang's capabilities led him to persuade Buffett that taking a risk on BYD was worthwhile.
Berkshire Hathaway initially invested $270 million in BYD, a move that Munger estimates to be worth around $8 billion or $9 billion today. Munger considers this investment to be the most significant contribution he has ever made to Berkshire Hathaway, emphasizing its exceptional rate of return. In Munger's own words, "I have never helped do anything at Berkshire that was as good as BYD."
Charlie Munger has not shied away from expressing strong opinions, including some pointed remarks directed at Elon Musk and Tesla enthusiasts. Here are a couple of notable statements from Munger that bring Tesla and its CEO into the conversation:
Munger, speaking on the podcast Acquired a few weeks ago, acknowledged Musk's unique abilities, stating, "He can do things you can't do. 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."
Earlier this year, Munger asserted, "BYD is so much ahead of Tesla in China. It's almost ridiculous."
Notably, there is a historical context to these comments. Buffett and Munger had the opportunity to invest in Tesla around the same time they invested in BYD but chose not to. Elon Musk highlighted this in a February 2023 tweet, suggesting that Buffett and Munger could have enjoyed significant success with Tesla. Musk mentioned, "Munger could’ve invested in Tesla at ~$200M valuation when I had lunch with him in late 2008." Considering Tesla's current market cap of $672.6 billion, the implied return on investment could have been substantial.
In essence, Munger's comments underscore the contrasting paths taken by BYD and Tesla, with Munger expressing a belief in BYD's manufacturing prowess and positioning in China, while also acknowledging Musk's unique capabilities but suggesting that BYD may have certain advantages in hands-on production. The decision not to invest in Tesla at an early stage is also highlighted as a potentially missed opportunity.
Rather than framing the discussion as a rivalry between Tesla and BYD, it's more fitting to view them as loosely complementary partners, each playing a significant role in propelling the transition to electric vehicles (EVs). Their approaches have varied, converging more as they've expanded, but both have achieved notable success. The coexistence of Tesla and BYD has been instrumental in driving the widespread adoption of electric cars, making them pivotal players in the EV landscape. The world benefits from their coexistence and contributions.
Wang Chuanfu's personal journey adds another layer to BYD's narrative. Rising from the hardships of being orphaned and growing up in extreme poverty as the son of rice farmers, Wang Chuanfu has become a highly influential and successful figure. Described by Munger as a "genius," Wang holds a Ph.D. in engineering and possesses a unique blend of talents, demonstrating an exceptional ability to both conceptualize and execute. Munger highlighted Wang's remarkable skills, noting his capability to examine a part in the morning and fabricate it in the afternoon, a level of proficiency that Munger finds unparalleled.
While Tesla is often synonymous with vertical integration, BYD takes this concept to another level. Beginning as a battery company, BYD has expanded its scope to include the production of batteries, electric cars, semiconductor chips, and more. It stands out as the world leader in plug-in vehicle sales, and in the realm of 100% electric vehicle (BEV) sales, it is now closely competing with Tesla.
The story of BYD, encapsulated in the mantra "Build Your Dreams," epitomizes Wang Chuanfu's journey from adversity to success, showcasing the power of determination and innovation in shaping the future of sustainable transportation.