‘You won’t see anyone owning the market’

Warren Buffett said on Saturday that it is premature to announce the winners of the electric vehicle race. Uncertainty is high in the sector.

“You’re going to see a change in vehicles, but you’re not going to see anybody holding the market because they changed vehicles,” Buffett said at Berkshire Hathaway’s ( BRK-A , BRK-B ) annual meeting.

In recent years, Tesla ( TSLA ) has dominated the US market for EVs. While Tesla still has a strong hold on the market with 54.3% market share, legacy automakers such as General Motors ( GM ) and Ford ( F ) have gradually begun to add market share as well.

Competition has intensified as traditional automakers and new startups spend billions on EV production, securing supply chains and infrastructure. Automakers including Tesla have signaled they are willing to enjoy lower margins through price cuts as they vie for market leadership.

Buffett cited Ford as a cautionary tale of how volatile the auto industry can be: “Henry Ford looked like they owned the world with the Model T…and 20 years later they were losing money,” he said.

Berkshire Hathaway owns A Dealer Group With over 100 franchisees representing 27 automakers in 10 states, primarily in Texas and Arizona. The group, which also owns railroad BNSF, bought dealership chain Van Tuil Group in 2014.

Berkshire owns about 50 million shares of General Motors worth $1.68 billion as of December 2022, but sold some of its GM stake in the second and third quarters of 2022.

But Buffett and his right-hand man, Charlie Munger, have said they have no interest in getting into the auto business.

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“Charlie [Munger] And I’ve felt for a long time that the auto industry is very tough,” Buffett said. “It’s a business with a lot of competitors around the world, and they’re not going to go away, and there seem to be winners. Anytime, but that won’t get you a permanent spot.”

Berkshire Hathaway CEO Warren Buffett answers questions at the annual shareholder meeting in Omaha, Neb., on May 6, 2023. (Screenshot/CNBC)

Munger acknowledged that while EVs are certainly on the rise, that rise comes with some significant costs.

“The electric vehicle is coming in a big way, 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.”

Better to identify opportunities more concretely, Buffett explained.

“I know where Apple is going to be in 5 or 10 years, and I don’t know what the car companies are going to be in 5 or 10 years,” he said.

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