THIS MOTORING YEAR: Global car company to watch in 2017

So Tesla has marched fearlessly where the established car-makers once feared to tread.

Yes, driving a Tesla still feels a little like stepping into next decade, and of course the world is a better place for the existence of the Silicon Valley start-up tech company.

It’s also been refreshing to see its philosophies swung into play in the car industry, which is an evolutionary beast that shuns revolution.

But Tesla’s window to smash out enough profit to build itself an unassailable brand position is rapidly closing. And it’s going backwards, losing money hand over fist, rather than solidifying its base.

It’s not just losing money. It’s losing credibility with those who aren’t cult members, with one hype-driven statement, prediction or missed target following another.

It’s losing credibility by beta testing sometimes dangerously unproven technology (Auto Pilot, anybody?) on its paying customers. It’s losing credibility with one product delay after another, then leaning on warranty provisions despite battery-electric vehicles having far fewer moving parts.

This year it said it was making a big leap forward in autonomous driving. In reality, it was sacked by its supplier, MobilEye, after the Israeli company chided Musk for claiming more than the sensor technology could deliver.

In reality, Tesla actually took away any semi-autonomous capability its cars already had and replaced it with a bunch of sensors it didn’t have any programming for and, again, claimed more capability than the new sensors were designed for.

Far from adding autonomy, the move actually took away commonly accepted stuff like active cruise control.

Engineers, software developers, ethicists and senior managers from car-makers often shake their heads at what they see as Tesla shenanigans. One Italian engineer asked me why Tesla hasn’t had any criminal proceedings over Auto Pilot deaths, yet Volkswagen’s non-fatal emissions cheating cost it tens of billions of dollars.

Mercedes-Benz parent company Daimler owned 20 per cent of Tesla a few years ago and officially sold up because the technical agreement reached its conclusion.

Insiders say the real reason was that Daimler, the world’s oldest car company, couldn’t reconcile its own thinking on validation, development and responsibility with Tesla’s more cavalier, seat-of-the-pants philosophy.

And Tesla’s problems don’t just stem from having no proven track record of making consistent profits from building and selling cars. It isn’t a profitable company, yet it has taken on another unprofitable sister company, saddling itself with an extra couple of billion in debt and justifying it by insisting the rest of us don’t understand the business model of vertical clean-power integration.

Its accounting practices seem driven more by the timing of its publicity needs than by anybody elses GAAP protocols, as the company banks its zero-emission subsidies and then puts them on the books to offset losses or boost quarterly statements, as the demand arises.

It says it doesn’t discount, yet its sales surge in the third quarter of this year looked suspiciously discount-driven, especially when sales fell off a cliff in Q4.

It just so happened to need a strong Q3 to push through the absorption of Solar City (Musk’s troubled solar roof panel operation), then showed off its new ‘solar roof’ without a single detail of pricing or an explanation of how they would be fitted by ordinary tradesmen.

Across most of the globe Tesla’s business model is built around the absorption of public money, in discounts for its buyers from government zero-emission vehicle subsidies and in the direct attraction of the same thing for building factories and EVs. When those subsidies are withdrawn or modified, Tesla sues, because it has based its business model around those subsidies.

When the German government finally joined the zero-emissions world this year, it announced that its subsidies would cut off just before the starting price for Tesla’s model range.

Coincidence? Of course not… Not when BMW, Volkswagen, Ford, Opel, Audi and Mercedes-Benz all have EVs or plug-in hybrids on sale beneath that number.

And where other car-makers are reaping profits in China, Tesla has refused to bend to the government’s demands that it set up a joint-venture with a local company. In the world’s biggest car-market, there is no Tesla manufacturing and no likelihood of Tesla.

And then there’s the 'Gigafactory', which seems unlikely to ever deliver the cost efficiencies Elon Musk insisted it would.

The vision for the Gigafactory was to bring all parts of battery production together under one roof to give Tesla an unassailable position, but it was a naive vision.

Making lithium-ion batteries isn’t a big money spinner in profit terms, but cathode, anode and electrolyte manufacturer are. And the companies making the big money on that stuff aren’t, surprisingly, very willing to hand it over to Tesla. So the Gigafactory will go into production with the least-profitable six pieces of the original 11-piece proposal.

What’s worse, there are at least 17 similar ‘gigafactories’ either on the drawing board or under construction around the world and Tesla is in bed with Panasonic, which isn’t one of the world’s top five battery-makers. Instead of giving Tesla an edge over everybody else, the limitations of its Gigafactory seem to leave it exposed to losses and sudden changes in battery technology.

Without going into detail on its reliability and customer-service issues, it all seems like a wide array of missteps for Tesla, but that’s not the gathering storm.

The real story is that we all thought the finish line for Tesla’s race to establish itself as a profit-making car company with an innovative brand image would end in 2020 or 2021, when the European Union’s new 95g/km CO2 limit kicked in.

That law, which covers new-vehicle fleets from each company has to average less than 95g/km of CO2, will make EVs and PHEVs absolutely vital for every car-maker in Europe. That, in turn, means that Tesla’s unique market position will no longer be unique.

In fact, plenty of car-makers are already ready to go and, rather than risk big-volume mistakes, will risk small-volume ones.

Benz has been toying with it for generations, so has Volkswagen, BMW and Audi. But there has been no profit potential in building pure battery-electric cars, as Tesla has generously demonstrated to the traditional premium car-makers, saving them billions in pilot programs to learn the same thing.

They’re almost ready now. Jaguar, a brand whose history with things electrical isn’t exactly robust, will have the gorgeous I-PACE SUV on the market in 2018, with 500km of range.

The same year will see Audi release its own all-electric e-tron SUV likely to be called the Q8, and Volkswagen will follow with an array of affordable EVs over three years -- including an SUV!

Then, by the end of the decade, Benz will have its Generation EQ on sale, as will Porsche with its Mission E.

Then there’s BMW, which invested heavily in the i brand, learned a lot from the i3 and is ready to electrify every traditional model by 2020, with an i5 and i6 already on the books before 2021.

Plus the Germans have banded together to make a fast-charging network across Europe’s highways.

And all of the Germans, French and Brits will have economy-of-scale advantages over Tesla. They’ll all do scalable architectures, with the same philosophy that spawns a 3, 4, 5, 6 and 7 Series (for example) off essentially the same underpinnings.

And, to make matters worse for Tesla, Toyota has just decided it will turn electric, too.

And a host of 300km small EVs are going to hit this year, with the Chevrolet Bolt already winning fans in the US.

While the unit costs of batteries and electric motors remain higher than internal combustion engines (ICE), the assembly cost and complexity is a lot lower, so it’s likely that the major players will shed jobs (and cost) as EV sales gather momentum.

There’s also the small matter of who will buy all these electric cars. If the answer is pessimistic, the traditional makers will have the profits of tens of millions of ICE cars to fall back on. BMW estimates that even by 2025, ICE cars will still be nearly 80 per cent of the market.

Sure, one or two of the current players will end up going the way of Oki or Ericsson or Nokia, but not all of them.

Tesla is staring up at a tsunami that’s getting bigger every month. We thought it had another four years to move its brand and its products to high ground. We were wrong. It has, at best, two years or, at worst, just one. The next one.