Tesla test drives hit roadblock in Iowa

DES MOINES — Tesla Motors is the hottest name in the growing electric car market. But don't plan on taking the Model S for a test drive in Iowa anytime soon.

Iowa joined a growing list of states tussling with Tesla Motors' business model when it told the company to cut short three days of test drives earlier this month in West Des Moines.

The Iowa Department of Transportation said the test drives were illegal for two reasons: Tesla isn't licensed as an auto dealer in Iowa, and state law prohibits carmakers from selling directly to the public.

Founded by billionaire inventor Elon Musk, Tesla Motors doesn't sell through traditional franchise dealerships. Customers can buy the Model S online or at one of a handful of Tesla stores around the country.

Electric vehicle advocates in Iowa say that by preventing Tesla from operating here — and forcing prospective buyers to travel to showrooms in Minneapolis or Chicago — the state is hampering the efforts to promote wider adoption of electric vehicles and the charging infrastructure they require.

Nabil Hanke owns Electric Dream Machines, a Des Moines company that converts gas cars to electric. Technically speaking, Tesla is one of his competitors. But Hanke said the state should work to attract Tesla, not kick the company out.

Because the Tesla Model S can drive as far and fast as a gas-powered car, it appeals to consumers who otherwise wouldn't consider driving electric. That makes it an important tool in getting more people to switch to greener electric vehicles, Hanke said.

"It's all about momentum, and Tesla is a fantastic momentum-mover," he said. "One Tesla can carry more momentum than 10 (Nissan) Leafs … because it's far more impressive and it changes the dialogue."

Traditional auto dealers aren't impressed. Backed by dealership trade groups, several states, including Arizona, New Jersey, Maryland, Texas and Virginia, have banned or restricted Tesla from selling to the public.

The Iowa Department of Transportation asked Tesla to stop its West Des Moines test drives after being alerted to the event by the Iowa Automobile Dealers Association, said Paul Steier, director of the DOT's Bureau of Investigation and Identity Protection.

Tesla set up in the parking lot of the West Des Moines Marriott on Sept. 9. The company planned to offer three days of test drives but canceled the last day after talking with DOT officials.

Kelly Hart, a Windsor Heights residents who owns a Nissan Leaf and a Porsche with a converted electric motor, was scheduled to take a test drive on the third day. Fortunately, he said, he will have an opportunity to visit a Tesla showroom later this year when he travels to Chicago.

Still, he would like to see the laws altered to allow Tesla to market its cars here. "I hope they get it changed because it's just ridiculous," he said.

State law requires auto dealers to be licensed, and by offering test drives, Tesla was acting as a dealer, Steier said.

Licensing is a matter of consumer protection, said Bruce Anderson, president of the Iowa Automobile Dealers Association. To obtain a license, dealers have to be insured and have a physical location where buyers can go if they have a problem with the vehicle. Car dealers also have to be bonded through the state. If a dealer fails to deliver a vehicle's title to the buyer, the buyer can file a claim against the dealers bond.

"You can't just set up in a hotel parking lot and sell cars," Anderson said. "It's not a Tesla issue. This is a regulated industry."

Another longstanding state law (prohibits auto manufacturers from selling directly to the public. Anderson said if carmakers owned dealerships, buying a car would be like buying a laptop at the Apple store — there would be one non-negotiable price.

"Independent dealers are aggressive in pricing against each other," he said. "If you wanted to buy directly from Chevy or Ford, the price on the sticker would be the price."

A spokesman for Tesla said the company does not believe the statutes apply because the company was not selling cars, only providing test drives.