Volkswagen just lost its crown as China’s biggest carmaker to Warren Buffett–backed BYD

After Volkswagen’s 15-year run atop China’s car market, there’s a new manufacturer in the driver’s seat: Warren Buffett–backed BYD.

The Shenzhen-based EV powerhouse topped domestic sales charts for the 12th month straight in December, according to data released by the Chinese Passenger Car Association and reported by Car News China. With the aid of generous government subsidies, BYD sold almost 30% more new cars compared to the year prior, good for a 12% share of the national market, to narrowly beat VW for the top spot on a yearly basis.

Warren Buffett’s Berkshire Hathaway first invested in BYD way back in 2008 on a prescient hunch that the then-no-name startup could become one of the world’s largest automakers, buying a 10% share for a mere $230 million. Buffett has been slowly selling off his position, but the investment has yielded him around $2.5 billion to date, Fortune reported last year.

“I have never helped do anything at Berkshire that was as good as BYD,” Buffett’s late business partner Charlie Munger, who helped close the 2008 deal, said last February.

Germany in recession and BYD soaring

Volkswagen was one of the first adopters of EV technology and an early mover in the Chinese market. But its sales growth has lagged behind the overall industry in China, and it has struggled to remain competitive in the worldwide market.

Those problems have been compounded by a recession in Germany and persistent inflation, which have pushed Volkwagen’s production costs up and made it harder to compete with Chinese producers boosted by subsidies.

“With many of our preexisting structures, processes, and high costs, we are no longer competitive as the Volkswagen brand,” Volkswagen brand chief Thomas Schaefer wrote in an internal memo last November.

China dominates the global EV industry: 59% of all new EVs were sold in China in 2022, when it also produced 64% of the world’s EVs, per World Economic Forum data. 

Its domestic manufacturers, including BYD, have been leading the charge at home and abroad. China leapfrogged Japan as the world’s largest auto exporter last year, according to the Chinese Association of Automobile Manufacturers. And one in every three vehicles sold in China is electric.

BYD has ridden the tailwinds of a strong domestic market and generous government subsidies to become a global juggernaut: It just overtook Tesla as the world’s largest EV seller.

“I believe the time has come for Chinese brands,” BYD chairman Wang Chuanfu said last August. “It’s an emotional need for the 1.4 billion Chinese people to see a Chinese brand becoming global.”

BYD vehicles are rare on American roads, largely because of a 27.5% tariff leveled on Chinese-made EVs. But BYD turned heads at motor shows last year with its low prices. It launched an EV in China last year starting at just $11,000. Even with the tariff, some experts say that at such a low price, BYD vehicles could still be competitive in the American market soon.

BYD and other Chinese automakers are facing resistance from the EU, which recently launched a probe to evaluate whether subsidies give them an unfair advantage in the export market.

This story was originally featured on Fortune.com