Has BYD reached its peak?

BYD claims the gloryTo put it in a more emotional way, "BYD claims the glory" in the past two years.
In the fourth quarter of 2023, BYD seized the crown of the global electric vehicle sales, successfully surpassing Tesla and becoming the top seller in the world for a single quarter.
Based on the sales data released by Tesla and BYD, BYD achieved approximately 520,000 units of global sales, defeating Tesla's approximately 480,000 units, and successfully climbed to the top spot.It is unclear if this news is related, but at the beginning of the new year, Tesla's stock price plummeted, with a decline of more than 11% in just two weeks.In 2023, BYD even dominated the Chinese market. Even when comparing total sales, including those of joint venture brands, BYD ranked third after SAIC Motor Corporation and FAW Group in terms of total sales. Its sales growth rate ranked first among the top ten car groups, surpassing the first two groups by a wide margin. (According to CPCA)
In terms of performance, despite the significant increase in sales volume over the past two years, BYD did not fall into the trap of sacrificing quality for quantity. In the first three quarters of 2023, BYD achieved a net profit attributable to shareholders of RMB 21.376 billion, a year-on-year increase of 129.47%; total revenue of RMB 422.275 billion, a year-on-year increase of 57.75%; and earnings per share of RMB 7.35, a year-on-year increase of 129.69%.BYD's net profit margin in the third quarter of last year was 6.4%, a significant increase of 1.5 percentage point compared to the same period last year. It is worth noting that this is no easy feat for a traditionally "small profits, large sales" car manufacturer burdened with heavy assets. Even in the third quarter of last year, Tesla, which has always been leading the global net profit margin, only achieved a net profit margin of 7.9%.Looking at the detailed financial report, BYD achieved significant sales growth not by resorting to low-level tactics such as price reduction and clearance sales, but by relying on its technical strength and product performance, winning the favor of domestic consumers and generating a consumer frenzy of "buying when you buy".BYD's long-standing strategy of high proportion of self-owned and controllable components has also played a critical role. An overseas research institution has analyzed the components of a popular BYD model and found that the battery, motor, chassis, chips, and most of the electronic components of this car are produced by BYD's subsidiaries. In-house components account for nearly 75% of the total value of the car. Such control and management ability in the entire supply chain is something that many leading global car companies are unable to achieve. This demonstrates BYD's ability to control costs.In addition, BYD's long-term focus and technical strength in lithium iron phosphate batteries are also paying off. While the western world was still discussing the obvious disadvantages of lithium iron phosphate, such as its lower energy density compared to ternary lithium batteries, Chinese power battery companies represented by BYD focused on innovation in the energy density of lithium iron phosphate batteries and made full use of their significant advantages in price and safety, catching the global battery industry off guard.
However, despite BYD's impressive achievements, which are truly inspiring, people still inevitably wonder whether BYD has reached its peak.Is there a downfall after success?There seems to be a straightforward issue that has prompted many people to question this: Starting from 2022, Warren Buffett's Berkshire Hathaway has been consistently reducing its holdings of BYD's stocks, coinciding with BYD's soaring performance and excellent financial results.On October 31st last year, according to documents disclosed by the Hong Kong Stock Exchange, Berkshire Hathaway completed the sale of approximately 820,000 H shares of BYD at an average price of HKD 245.86 per share, reducing its stake from 8.05% to 7.98%. It is worth noting that at its peak in 2022, Berkshire Hathaway's stake in BYD reached nearly 20%. After more than ten consecutive reductions, the media estimated that Berkshire Hathaway has accumulated nearly $1 billion in proceeds.
Buffett is undoubtedly a shrewd investor. Throughout his decades-long investment history, what he is most famous for is his famous saying, "Be fearful when others are greedy and be greedy when others are fearful." Therefore, Buffett's reduction in holdings easily leads to the following three interpretations:(1) Buffett sees better investment opportunities than BYD;(2) Buffett once again demonstrates his extraordinary ability to time the market, locking in profits at the peak of the company's performance;
(3) There are internal operations or actions by the high-level management team at BYD that have raised concerns for the legendary investor.In fact, if we pay attention to Buffett and his late friend Munger's statements during the reduction period, it seems that the third interpretation is not valid. In Munger's last media interview before his death, he specifically praised the technology and performance of BYD's products and highlighted the talent and dedication of BYD's founder, Wang Chuanfu.So the first two interpretations seem more plausible. Regarding (1), during the period of reducing holdings in BYD, Buffett did indeed increase his holdings of the five major Japanese trading companies. From the current perspective, the Tokyo stock market performed quite well last year, while BYD's stock price fell by more than 22% throughout the year. Buffett's actions seem to once again prove his extraordinary investment ability.Lastly, the second interpretation seems to be in line with the title of this article. Could it be that BYD's performance has really reached its peak?BYD's Unresolved ChallengesBased on various research reports, I believe the following questions seem to be the unresolved challenges for BYD to break through itself and achieve greater development.Firstly, BYD's main sales