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What if Tesla (NASDAQ: TSLA) is primarily a car company?

After months of being beaten down in Europe, Tesla’s sales are making a comeback, where both competition and Elon Musk’s political stances had hurt it last year. In February, EU sales jumped 29% to 13,740. However, it lagged rival BYD, which saw sales increase 185% to 15,438 for the month.

Have You read The New Report Shaking Up Retirement Plans? Americans are answering three questions and many are realizing they can retire earlier than expected.

Questions remain about whether Tesla can reverse its falling EV sales. It continues to struggle in China, the world’s largest EV market, where dozens of EV brands compete. In the US, the entire EV industry has been hurt by the end of the $7,500 tax credit for EV purchases, which expired on September 30. However, Tesla may be fortunate that the companies that tried to take its market share in America have largely retreated from the business and taken large write-offs. This includes Ford  (NYSE: F) and GM (NYSE: GM). (A large inventory of used Teslas in the US could undermine sales of its new vehicles.)

Tesla’s market cap does not rely primarily on its EV sales, and that may harm investors sooner rather than later.

Tesla’s Robotaxi has been accident-prone. Additionally, several accidents involving its legacy cars have caused injuries. Therefore, there are questions about the safety of the design of some vehicles. Google’s Waymo has challenged Tesla with its own self-driving vehicles, and, in China, a company called WeRide is a rival.  And, its Opimus robot may never become mainstream at all. It has competitors as well. This includes Agility Robotics (Digit) and Boston Dynamics (Atlas).

Suppose Tesla’s value became more dependent on car sales because some of its new initiatives faltered? Elon Musk says these initiatives are the cornerstone of its market cap.

So, what if Tesla turns out to be primarily an EV company? Its current market cap is $1.43 trillion. The market cap of BYD, the world’s largest EV company, is $144 billion. Toyota, the world’s largest car company by unit sales, has a market cap of $274 billion. This means if the market views Tesla primarily as a car company, its market cap would crater.

It is hard to find anyone who will make the case for a major Tesla market-cap reset today. It is worth noting, however, that its stock price has not done much better than the S&P 500 over the last five years. The S&P is up 66% over the period. Tesla shares are up 84% over that period. It has had two major downturns along the way, the first in early 2023 and the second in March and April next year.