Iowa: Sorry, Tesla, You Can't Do Test Drives Here

Sep 25, 2014 04:10 PM EDT | Jordan Ecarma

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Tesla has run into trouble again--this time getting a scolding for conducting test drives in Iowa.

The electric carmaker has been determined to maintain its direct-sales model, something that hasn't exactly made it popular with dealerships. Earlier this month, the Iowa Department of Transportation cut short a three-day run of Tesla test drives, saying they were illegal because Tesla isn't licensed to sell cars in Iowa and its direct-sales business is not allowed under state law, the Des Moines Register reported.

While Tesla's popular Model S can be purchased online in any state, the company isn't allowed to conduct test drives in Iowa since doing so means that Tesla is acting as an auto dealer, said Paul Steier of the DOT's Bureau of Investigation and Identity Protection.

The department shut down Tesla test drives in Des Moines after being alerted by the Iowa Automobile Dealers Association.

Because the company was not actually selling cars, Tesla did not believe it was in violation of state law, a Tesla spokeswoman told the Register.

There really is nothing in the law that would allow (Tesla) to keep" conducting test drives, Steier said. "We're not at all opposed to their marketing. They just have to work within the laws of the state."

State law that requires licensed auto dealers is intended to protect consumers and encourage competitive pricing, Bruce Anderson, president of the Iowa Automobile Dealers Association, told the Register.

"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."

On the other hand, Tesla supporters say that impeding the company's electric vehicle sales is a stumbling block to a larger effort that is working to promote electric cars and build charging infrastructure to support their adoption.

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