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There will be no winner in the EV market as uncertainty abounds in the sector. This is what Berkshire Hathaway CEO Warren Buffett said at the firm’s annual meeting this weekend.
"You will see a change in the vehicles, but you won't see anyone that owns the market because they changed the vehicles," Buffett said, as quoted by Yahoo Finance.
To illustrate the uncertainty in electric vehicles, Buffett reminded his audience how Ford had dominated the car market for a while thanks to the Model T but two decades later it was operating at a loss.
Perhaps the reference should serve as a cautionary tale for Tesla, which currently sells the most EVs of any carmakers in the United States but competitors are multiplying. At the same time, however, they have yet to reach Tesla’s position for reasons ranging from supply chain challenges to funding problems.
Last week, Reuters reported that U.S. EV startups were expected to report another quarter of burning through cash with no visible progress made amid a challenging economic backdrop featuring declining EV demand.
"Any company that's losing money with a low valuation is toast and EVs are no exception. I think it is just a slow bleed. Maybe they'll get lucky and some of their technologies maybe bought by bigger players," Thomas Hayes, chairman of hedge fund Great Hill Capital, told Reuters.
Yet bigger players are having trouble as well. GM is also burning cash on EVs although it hopes to stop this by 2025. Ford, meanwhile, reported a loss of $722 million for its EV division for the first quarter, which translates into a loss of more than $66,000 per vehicle, energy market analyst and commentator Robert Bryce reported last week.
Tesla is not trouble-free, either, being forced to cut prices to keep demand while raw material inflation eats up profit margins. That problem could worsen still amid federal government subsidy plans under the Inflation Reduction Act.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.