Tesla & The Science Of Risk - CleanTechnica

April 16th, 2020 by Carolyn Fortuna

The science of risk draws upon models that help to show what can happen under specific conditions. Risk models are mathematical representations of complex systems, and the information they provide may be so unexpected or startling that drastic steps are sometimes taken after digesting them. Reactions that lead to action should be the case with the climate crisis, so that the human aversion to uncertainty and risks can be offset by climate science. Indeed, with the backdrop of COVID-19 alongside the climate crisis, a new melange of courage, caution, and chance is warranted, and, seemingly as a result, Tesla is seeing renewed confidence from investors.

Public awareness of collective dilemmas often begins with modeling. Climate change consciousness arose with the help of models that used more of well-known physics and less of actual observational data.

“[Global problems] change the basis on which we can trust in science and trust in institutions, which are charged with managing these risks,” explains Jamie Wardman, professor of risk management at the University of Nottingham. That’s why “risk has become central to our understanding of how the world has been transforming in the past century.”

In the period following a disaster, a speedy, efficient, and detailed response is required. Our attitudes toward risk need us to take conscious control so that our responses to stress, emotions, and failure correspond adequately with our levels of preparation and experience.

The COVID-19 pandemic is without parallel in most of our lifetimes, and it has caused us all to rethink the institutions upon which we depend. With bailouts imminent to help assuage an economic catastrophe, investors interested in the potential of green industries seem to be shifting their requests toward climate services. The rationale for this shift is often attributed to the demand for timely and actionable climate knowledge as part of the movement away from the public interest and towards the ongoing pursuit of profit.

As part of this new investment perspective, Tesla has risen to the top of companies that can provide client-focused, solutions-oriented, resource-efficient, and self-replicating products and services.

Tesla and the Science of Risk: Vision Meets Practicality

Shares of Tesla have risen approximately 26% this week as traders look beyond the short-term impact of the coronavirus pandemic. Financial firms like Credit Suisse and analysts like Dan Levy indicate that Tesla has a larger competitive edge in the transition to EVs than legacy automakers. Late to the EV game and compromised by the devastating economic slowdown, legacy automakers struggle to balance the long-term shift to EVs as a global cultural norm.

In a note, Goldman Sachs analyst Mark Delaney started coverage of Tesla with an $864 price target, compared to its latest price of $745. Delaney commented, “We believe that the combination of Tesla’s product leadership (including its over-the-air updates to continue to improve vehicle performance), brand/early-mover advantage, vertical integration, and the long development cycles in autos (new cars can take 2-4 years to develop) will help Tesla to maintain a strong market position.”

Tesla is winning the race due to gains in battery R&D, improved liquidity, and continuing patterns of production improvements. The Motley Fool says that Wall Street is paying even closer attention to Tesla than they normally do, with advocates noting that the company’s prospects go far beyond the electric vehicle industry. Advances in batteries could have applications for a significant number of industries, as energy storage offers crucial benefits in times of economic uncertainty and climate crisis pressures. Motley Fool does ask whether core customers have the capacity to remain financially able to support Tesla through future purchases in tenuous times, but indications point to continuing confidence from the Tesla audience.

A significant plus on the Tesla balance sheet is its positioning in China. Even as the coronavirus pandemic continued to depress auto demand, Tesla’s China registrations rose to 12,709 units in March from 2,314 in February. Overall, auto sales in China plunged 43.4% in March. Tesla began deliveries from its Shanghai factory late last year and now is selling two more Model 3 variants produced at the factory — a Long Range model and a Performance model.

The Tesla story is interwoven with human tales of inspirational characters like CEO Elon Musk and the loyal Tesla community. Musk continually keeps people excited about Tesla, threading ideas about battery technology into EV conversations when chatting with analysts or media. Tesla is unique in that it offers a direct and unrelenting series of solutions for the climate crisis that responds to the scale, speed, and severity of climate change.

It is that combination of vision and practical applications that keep the company resilient, able to transcend pessimistic risk models, and an investor favorite, even in times of economic stagnation.

Image used with permission of Statista/IMF

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Tags: COVID-19, Elon Musk, Europe, Tesla

About the Author

Carolyn Fortuna Carolyn Fortuna, Ph.D. is a writer, researcher, and educator with a lifelong dedication to ecojustice. She's won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. As part of her portfolio divestment, she purchased 5 shares of Tesla stock. Please follow her on Twitter and Facebook.

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