Tesla share price climbs following latest disruptive development

This latest development rates your driving and gives a score, and here is what it could mean for Tesla…

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The Tesla Inc (NASDAQ: TSLA) share price climbed 2.2% last night, moving within reach of US$800 a share. Investor sentiment has largely been positive over the past month as the company takes steps towards full self-driving (FSD).

Recently, the US-based company snuck in a new bit of software for its drivers hoping to gain access to the FSD beta program.

The outcome was thousands of slow-moving Teslas littered throughout the United States. This might be strange at face value but there is a method to the madness.

See, the latest request to join the program came bundled with the company’s new “Tesla Safety Score”. This acts as a report card for driving habits and only the best scores will be rewarded with access to the beta program.

Beyond this, numerous Tesla commentators have speculated there may be more to the Safety Score than first thought.

Let’s take a closer look at the details.

What’s moving the Tesla share price?

Incentivising safer driving

Firstly, the introduction of a scoring system is a win for all motorists. Much like report cards in school, the scoring incentivises drivers to be on their best behaviour — or risk a scathing review. This is determined by 5 key safety factors being measured by the vehicle. These include:

  • Forward collision warning per 1,000 miles
  • Hard braking
  • Aggressive turning
  • Unsafe following
  • Forced autopilot disengagement

These 5 factors are combined into a formula to calculate the driver’s ‘predicted collision frequency’ per 1 million miles. This means drivers are being led by the FSD carrot to attempt to drive more cautiously — great!

But, at the same time, Tesla owners have wondered whether a stick approach could come into effect as well.

For instance, Tesla offers its own vehicle insurance product and is making an effort to expand this offering. The implementation of the Safety Score could mean owners are given dynamic feedback on insurance prices based on their driving prowess.

This could see drivers paying lower premiums for exhibiting better driving practices. In turn, both the customer and company would win out as safer drivers usually mean fewer accidents, resulting in fewer insurance payouts.

Such use of technology in the insurance market could spell disruption for ASX-listed companies such as QBE Insurance Group Ltd (ASX: QBE) and Insurance Australia Group Ltd (ASX: IAG).

Building data for regulators

It is no secret that FSD has been a long-awaited ambition for Tesla followers and it’s still in the works. Furthermore, the latest iterations of Tesla FSD are on version 10 — with demonstrations showing cars able to navigate through city streets with minimal intervention.

Although, a big barrier to mainstream adoption awaits Tesla in the form of regulators. Hence, some commentators are speculating on the use of the Safety Score data to make a case for FSD. For instance, the company would be hoping to show that FSD would exhibit a higher score than the average human driver.

Analyst Daniel Ives of Wedbush has noted regulatory risk as a key concern for investors. Despite this, he holds a Tesla share price target of US$1,000.

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Motley Fool contributor Mitchell Lawler owns shares in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Tesla. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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