Elon Musk, the CEO of Tesla, recently tweeted that Warren Buffett’s Berkshire Hathaway should consider buying Tesla stock. Despite Musk’s encouragement, it is unlikely that Buffett will take this advice. Musk’s suggestion came in response to a tweet proposing that Berkshire Hathaway should sell its stake in Apple and invest in Tesla instead, following Berkshire Hathaway’s recent decision to trim its Apple holdings by 10%.
Warren Buffett and his longtime business partner Charlie Munger have previously expressed reservations about investing in the automotive industry. While Berkshire Hathaway did acquire a 10% stake in BYD, an electric vehicle maker, in 2008, Buffett and Munger have been cautious about the industry’s challenges and uncertainties. They believe that the auto industry is highly competitive, with worldwide competitors that are unlikely to disappear. As a result, they find it difficult to predict the long-term prospects of car companies.
Buffett and Munger’s concerns about the automotive industry were reiterated at Berkshire Hathaway’s annual shareholder meeting in 2023. They emphasized the significant capital costs and risks associated with electric vehicles, despite their rapid growth. These factors make investing in the auto industry unappealing to Buffett and Munger, who prefer to avoid high capital costs and risks in their investments.
Despite Musk’s suggestion that Berkshire Hathaway should invest in Tesla stock, Buffett’s cautious approach to the auto industry and preference for stable investments make it unlikely that Berkshire Hathaway will acquire Tesla stock. While Musk sees potential in Tesla, Buffett and Munger remain skeptical about the long-term viability and stability of the automotive industry.
