Elon Musk recently took to Twitter to encourage Warren Buffett’s Berkshire Hathaway to buy Tesla stock, calling it an “obvious move.” However, despite Musk’s enthusiasm, it’s highly unlikely that Buffett will take this advice.
In response to a tweet suggesting that Berkshire Hathaway should sell its stake in Apple and invest in Tesla instead, Musk tweeted his recommendation. The timing of Musk’s tweet was interesting, as it came just a day after Berkshire Hathaway’s annual shareholder meeting, where it was revealed that the company had trimmed its stake in Apple by 10%.
While Berkshire Hathaway has invested in electric vehicle makers before, acquiring a 10% stake in BYD back in 2008, Buffett and the late Charlie Munger have expressed reservations about the automotive industry. At Berkshire Hathaway’s 2023 annual shareholder meeting, both Buffett and Munger spoke about the challenges of investing in the auto industry. They believed that the industry was too tough and faced intense competition that wasn’t likely to disappear. They also expressed uncertainty about the long-term prospects of car companies compared to Apple.
Buffett stated, “I think I know where Apple’s going to be in five or ten years… I don’t know what the car companies are going to be in five or ten years.” Munger echoed this sentiment, highlighting the substantial capital costs and risks associated with electric vehicles.
Despite their successful investment in BYD, Buffett and Munger’s skepticism about the auto industry suggests that Berkshire Hathaway will not be investing in Tesla any time soon. It’s worth noting that this isn’t the first time Musk has suggested that Berkshire Hathaway should consider investing in Tesla.
While Elon Musk’s recommendation may seem appealing considering Tesla’s growth and potential, the skepticism from Buffett and Munger, who are widely respected investors, provides a sobering perspective. The automotive industry is indeed highly competitive and constantly evolving. Investing in it requires careful consideration of capital costs and potential risks.
In conclusion, while Elon Musk believes Warren Buffett should buy Tesla stock, it’s unlikely to happen given Buffett’s previous comments and skepticism about the automotive industry. While Tesla has emerged as a major player in the electric vehicle market, Buffett and Munger’s concerns about the industry’s challenges and uncertainties make it unlikely for Berkshire Hathaway to take the plunge.
