Pub. 2 Issue 1

32 33 www.glancda.org SPRING 2014 T esla Motors is a newcomer to the automobile manufacturing business, one with a progres- sive idea. Tesla builds electric cars. More specifically, the company started by making stylish sports cars, which is a very green thing to be doing and which also has the vir- tue of being appealing to anyone who likes to drive something beautiful, fast, and (with prices between $60,000 and $101,000) expensive. The business was started in 2003 by a small group of engineers from Silicon Valley. The first model was sold early in 2008. Today, the company says there are more than 2,300 of its Roadsters being driven in more than 37 different companies, including the U.S. Why did the company start with sports cars? The answer to that specific ques- tion can be found in a blog post by a bil- lionaire named Elon Musk. You know his work, even if you don’t know his name: he was born in South Africa in 1971, and he has been involved in things like PayPal and SpaceX, which was the first private company to put a rocket into space. He is currently Tesla Motor’s CEO, and he is also one of its found- ers. According to Mr. Musk, he and the other founders knew their cars would be expensive. They though it would be an easier sell if they went after a market where people are already accustomed to spending a lot of money. They could introduce other cars, at a more reason- able price, later on. What else is different about Tesla Mo- tors? For one thing, the company sells its cars to its customers directly. It doesn’t have any franchise agreements. That’s a problem for a lot of people. In fact, three states (Arizona, New Jersey, and Texas) have blocked direct car sales. Other states are still struggling with the issue. Tesla has fended off restrictions so far in North Carolina, Massachusetts, Minnesota, and Washington. (The case in Washington is interesting, because the state chose to make an exception for Tesla, but to ban other companies from using the same sales model as Tesla in the future.) Colorado, Georgia, and Virginia have put restrictions on the process, and the issue is still undecided in Ohio and New York. If you read what Elon Musk has to say on the subject, then you could be excused for believing that this is a clear-cut case of good guys and bad guys, and free enterprise versus entrenched business interests who are defending their well- established turf at the expense of their consumers. (The good guys, of course, are Elon Musk and the other people who run Tesla Motors. The villains, accord- ing to Tesla are the people who run fran- chises and people like Governor Chris Christie of New Jersey, where the Tesla business model has come under scrutiny and significant push-back). The truth, of course, is somewhat more complicated. It often is. But the place to start is by listening to the other side. In this case, the other side has been widely explained by Jim Appleton in many recent media editorials and interviews. Mr. Appleton is the president-elect for the Automotive Trade Association Executives (ATAE), and he is also the president of NJ CAR, the state car dealer association for New Jersey. Mr. Appleton makes an argument in the Wall Street Journal and other places for the idea that car dealerships should continue to act as intermediaries be- cause they add value. They protect the consumer, and their competition keeps prices lower than they would be other- wise. He also says that it is a bad idea for any car manufacturer to compete with the dealerships: • How do franchises protect consum- ers? This is an important point, and perhaps the most important point services, savings on medical expenses. For example, can cost anywhere from $400 to $1,800 for the exact same service. 6 HSAs offer control and choices regarding health care needs With these plans, consumers have unlimited choices regarding services, service providers, and medical expenditures. With an HSA, one can go to the doctor of his or her choice. 7 HSAs are portable If a consumer switches jobs, the HSA account follows. And, unlike traditional insurance plans, consumers do not lose unused funds in these accounts at the end of the year. The consumer “owns” this account and all benefits that come from its good management. 8 HSAs create financial incentives for managing health care expenses There are always unfortunate cases where a cata- strophic event occurs and emergency medical services are required that do not allow time to “shop around.” But the majority of medical transactions faced in the course of a life- time are really more mundane and more predictable. Since the HSA is a consumer-controlled cash account, that consumer is encouraged to think about whether a particular expense is really worth it or if a cheaper alternative, like a generic medication instead of name brand, might work just as well. 9 HSAs are a powerful tool for retirement investing Over time, a relatively healthy person or someone who is a decent financial manager can save a good deal of money and investment earnings in an HSA. Consumers who are between the ages of 55 and 65 also have the opportunity to make additional “catch-up” contributions to the fund. Increased access to this fund begins at age 65. The account can continue to be used for medical expenses with no pen- alties, but withdrawals for other purposes are also possible (after age 65) and often face fewer penalties than withdraw- als from an IRA. 10 HSAs create a health-conscious community and put market forces to work that drive down health costs for everyone Because of the incentive to save and earn money, consumers are encouraged to become educated on health care and medi- cal services to become active participants in the control of their health and wellness. Providers of medical products and services are forced into a healthier competition for consumers. Additionally, there is a personal incentive to make smarter decisions about the use of the health care system, then de- creasing the likelihood of its abuse. Overall, it becomes a more efficient system, and the costs of medical services decrease to meet the new market realities. The HSA is an easily understood tool that offers consumers a very manageable way to take control of their health in- vestments. It puts all of the financial incentives in the right place to encourage the consumer to make healthier lifestyle choices, better health care-related financial decisions, and to invest and save money over time for future medical needs. Consumer-driven health care has the power to change a fam- ily’s financial future while also catalyzing positive change in America’s health care system as a whole.  Tesla and Its Business Model BY S USAN E. MORGAN, THE NEWSLINK GROUP, LLC  10 Reasons — continued from page 31  Tesla — continued on page 34