/ December 18, 2025 Tesla shares experienced a sharp reversal this week, shedding 4.6% on Wednesday after hitting a record high just a day earlier. The sell-off was triggered by regulatory pressure from California, a crucial market for electric vehicles in the United States. The decline coincided with broader weakness across the artificial intelligence sector. A Valuation Built on Future Promise The market’s perception of Tesla has diverged dramatically from its core automotive operations. Analysis from William Blair suggests the traditional vehicle business is now valued at only $30 to $40 per share. This means over 70% of the company’s total market capitalization is attributed to its autonomous driving division. Notably, Tesla’s energy storage business has reached a valuation comparable to its entire car manufacturing segment. Trading at a price-to-earnings ratio exceeding 320, the company is clearly not being judged as a conventional automaker. “Investors are viewing Tesla through the lens of autonomy and energy, not through traditional automotive metrics,” explained William Blair’s Jed Dorsheimer. DMV Deadline Over “Self-Driving” Claims The immediate pressure came from the California Department of Motor Vehicles (DMV), which delivered a 60-day ultimatum to the automaker. Tesla must revise how it advertises its driver-assistance systems or face a potential 30-day suspension of its dealer license. This action formally adopts a ruling from an administrative judge last November. The regulator alleges Tesla violates state law by using terms like “Full Self-Driving Capability” and “Autopilot” for features that do not enable autonomous operation. However, Goldman Sachs analysts downplay the risk of a significant business disruption, noting Tesla has previously adopted alternative nomenclature for its systems when faced with regulatory scrutiny.