The only reason to buy Tesla stock has nothing to do with its EV business, market strategist says

• Tesla competes in an industry that has not been kind to its investors over the past few decades.
• Shares of General Motors, Ford, Honda, and Mercedes are trading at the same price today as they were over a decade ago.
• When it comes to Tesla stock, the only reason to buy has nothing to do with its electric vehicle business.

Tesla stock has soared 142% year-to-date and its valuation has cruised past $900 billion as investors cheer the company's continued growth in its electric vehicle deliveries.

But according to a Wednesday note from DataTrek Research co-founder Nicholas Colas, there's only one reason to buy Tesla stock at its current levels, and it has nothing to do with its EV business.

The car industry is difficult to compete in, as evidenced by the current stock prices of legacy automakers, he observed.

Shares of Ford and Mercedes are trading at the same prices today as they were in in the 1990s, Honda is where it was in January 2006, and General Motors is at August 2013 levels.

Clearly, investors have not been rewarding auto companies for simply selling millions of cars every year, even as legacy automakers transition their fleet to fully electric vehicles.

So when it comes to Tesla stock, don't just look at its EV sales, according to Colas.

To buy Tesla at its current valuation of $918 billion and expect further upside, an investor has to believe that the company's self-driving technology is close to reaching a truly autonomous threshold that can enable the robotaxi thesis commonly echoed by Ark Invest's Cathie Wood.

Colas estimated that about $600 billion to $700 billion of Tesla's current market value is "a call option on autonomous driving."

"Even Elon Musk himself has said Tesla is worth almost nothing without this technology. If and when autonomous is ready for prime time, Tesla should be there first or at least early. That is a trillion-dollar opportunity at the very least. But it is also an incredibly difficult challenge to make a truly self-driving car," Colas said.

The remaining $200 billion to $300 billion of Tesla's current market valuation is assigned to the company's EV business, which is comparable to Toyota's current market valuation.

Both Toyota and Tesla "will almost certainly be around in 20 years making cars. I cannot confidently say the same thing about any other auto company in existence today. That's how hard the next two decades will be on this industry," Colas said.

That means if Tesla fails to deliver on full autonomous driving technology, its stock could plunge about 70% based on Colas' valuation model.

"The investment takeaway is pretty clear cut: avoid traditional auto stocks, and only overweight Tesla if you have a degree of conviction that Musk and his team can soon deliver a truly autonomous vehicle," he said.