The Oracle Has Spoken: Buffett’s Landmark Exit
In a move sending ripples through the global automotive and investment communities, Warren Buffett Berkshire Hathaway has reportedly sold its remaining shares in Chinese electric vehicle (EV) giant BYD. This concludes a historically profitable investment and raises a critical question: why now? A detailed analysis circulating online breaks down several underlying financial and operational concerns that likely prompted this high-profile exit.
High Sales Masking Negative Cash Flow
The first major red flag is BYD’s persistent negative cash flow. According to the research, despite its impressive annual sales figures of over four million vehicles, the company has been burning through cash. This financial pressure was highlighted by the necessity for BYD to raise a record-breaking $5.6 billion in equity capital in March 2025, signaling that its operations are not self-sustaining financially.
The Hidden Cost of Supplier Financing
Historically, BYD’s ability to report positive free cash flow was allegedly achieved through a form of “hidden supplier financing.” The analysis points out that BYD systematically increased the time it took to pay its suppliers, with payment terms stretching from 102 days in mid-2020 to over 130 days by mid-2025. By holding onto cash instead of paying its bills, the company avoided cash outflows. The research estimates this has created a massive “capital gap” of approximately $20 billion—the amount needed to pay suppliers within the industry norm of 70 days.
An Over-Reliance on Government Subsidies
Further investigation into BYD’s profitability revealed that a significant share of its reported earnings was not from selling cars, but from Chinese government subsidies. Unusually, these subsidies were reportedly related to “daily activities” rather than being tied to specific emissions targets or R&D goals, which is the standard practice in other countries. This raises serious questions about the core, unsubsidized profitability of the business.
Slowing Growth and International Hurdles
After years of explosive growth, BYD’s vehicle sales have reportedly been flatlining in recent months. The analysis suggests that BYD’s China sales likely peaked in December 2024, followed by an unusually sharp seasonal decline in Q1 2025 and a weak recovery in Q2. Compounding this domestic slowdown is BYD’s inability to meaningfully expand internationally. Due to significant tariffs in major markets like Europe and the United States, the company is handicapped in finding new avenues for growth to offset the weakness at home.
Conclusion: A Timely and Calculated Decision
When viewed together, these factors—negative cash flow, questionable accounting practices, subsidy dependence, decreasing efficiency, and stalling growth—paint a precarious picture. The analysis concludes that Warren Buffett and his team likely arrived at the same conclusions. Warren Buffett decision to exit the BYD investment, therefore, appears to be a calculated move based on a sharp decline in the company’s underlying financial health and future growth prospects.
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