Berkshire Hathaway Automotive Berkshire Hathaway Energy Pilot Flying J Special Report

Special Report: Opportunities Abound for Berkshire in the Growing EV Market

(BRK.A), (BRK.B)

Everyone can see it coming, petrol, gas, diesel, whatever you want to call it, will play a diminishing role in fueling cars of the future. It’s already playing a diminishing role right now.

Let’s look at a few numbers.

In 2016, 750,000 EV cars were sold worldwide, with Norway the highest in market share at 29%, and China the largest in total units sold. And, 2016 marked the first time that EVs passed more than 2 million vehicles on the road worldwide.

While those numbers are still tiny when compared to the 2 billion vehicles in service around the world, they confirm that the EV is not only here to stay, but will play an ever larger role in personal and commercial transportation.

Credit Tesla with making the EV fashionable in the U.S., and drawing in other car makers that are now debuting their own models. In fact, Tesla has made the EV so fashionable among high-end buyers that in Europe Tesla’s Model S outsold both the traditional petrol-fueled BMW 7 series and Mercedes-Benz S class.

It’s easy to go down the list of carmakers that are showing off their EV vehicles at this year’s auto shows. Volkswagen, which was committed to diesel cars before its huge emissions scandal, is now touting its EV retro-styled concept bus, the I.D. Buzz. And Jaguar’s heading to market in late-2018 with its I-Pace SUV.

BMW, Hyundai, Nissan, Porsche, Toyota, and Volvo, to name a few, are all announcing new EV models or EV versions of existing models. Even Bentley has an all-electric four-door coupe in the works for 2019, and a goal to have an electric version of each of its models by 2025.

For drivers in China that purchased 600,000 EVs in 2017 at the lower-end of the market, it’s China’s BYD that led the way, with Chery, SAIC Wuling, Hawtai, and BAIC all moving more than 3,000 units in December 2017 alone.

The new energy company BYD, which Berkshire Hathaway has a roughly $1.9 billion stake in, sold almost 14,000 ev cars in February 2018, and is the global sales leader despite not being in the U.S. market except for its pure-electric buses.

Back in the U.S., Tesla’s Model 3 is aimed at bringing the company’s cars to a whole new set of consumers, and it’s not the only one making inroads at making an EV with true extended driving range affordable.

GM’s more mainstream price point Chevy Bolt, which boasts a 238-mile range, is now heading towards the company’s goal of moving 30,000 units a year.

All this EV progress bring up the question of what’s Berkshire Hathaway’s role in it?

It’s likely not as a manufacturer.

Berkshire’s roughly 8 percent stake in BYD, and its stake in GM, which was actually down 10 million shares (-16.7%) as of its most recent 13-F filing, doesn’t indicate Warren Buffett wants to be anything but a passive investor in making cars.

Berkshire will certainly play a role in new and used EV sales, as its Berkshire Hathaway Automotive Group of 78 independently operated dealerships with over 100 franchises in 10 states, gives the company a slice of that market.

However, fueling EVs is also right up Berkshire’s alley.

Not the Cars, the Fuel

Berkshire’s in a number of interesting spaces when it comes to fueling EVs. As the EV market-share grows, so do the number of consumers that will be charging their vehicles at home.

When it comes to home charging, its utilities, including PacifiCorp, MidAmerican Energy and NV Energy generate and supply power in twelve states. And overseas, Berkshire’s Northern Powergrid delivers electricity to 3.9 million homes and businesses in England.

Berkshire also is a big player in the electricity transmission business. Its BHE U.S. Transmission owns over a thousand miles of transmission lines in the southern U.S. and California. In Canada, Berkshire’s AltaLink is the largest regulated transmission company in Alberta, supplying electricity to more than 85% of the population.

Taking the EV on the Road

Even though much of the EV market will be charging its cars overnight at home, there is still a big need to be able to quickly charge your vehicle while traveling.

Out of necessity, Tesla has made a substantial investment in this space, to-date building 1,191 Supercharger Stations with 9,184 Superchargers.

These superchargers already benefit Berkshire in areas that get their power from Berkshire-owned utilities.

And a recent Berkshire acquisition has the potential to greatly boost their own capability in this space.

The New King of the Travel Center

In October 2017, Berkshire took a 38.6 percent equity stake in Pilot Flying J, the largest operator of travel centers in North America. That stake will grow in 2023 when Berkshire will become the majority shareholder by acquiring an additional 41.4 percent equity.

With 750 locations across the U.S. and Canada, and more than $20 billion in revenues, Pilot Flying J already plays a substantial role in fueling cars and commercial trucks. It’s also a natural fit for EV charging stations. And while EV ranges continue to grow, the need to charge your vehicle away from home is also growing.

That’s Not All

The charging station space is so new that there are likely to be multiple opportunities for Berkshire, as the lack of a need for storage tanks, which kept traditional petrol fueling stations centralized, means that charging stations can fit into public parking lots, mall and office building parking, and other spaces that were inconceivable for a gas station.

For example, in Oregon, PacifiCorp just received the greenlight to build seven charging stations as part of a $4.64 million transportation electrification plan.

PacifiCorp plans to install seven “pods” that would include multiple dual-standard direct current fast chargers, which can provide up to 80 miles of driving range in 20 minutes of charging, and at least one level 2 port, which offers up to 20 miles of range in an hour of charging.

Whether utilities will ultimately be allowed to own large networks of charging stations remains to be seen, as some environmental groups and potential competitors in the space are already objecting to that concept.

However, the future looks bright for Berkshire. It’s got the electric power, it’s got the transmission, and it’s even got the car dealerships and travel centers that clearly will make it a player in the growing EV market.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.