Joel Aschbrenner

jaschbrenn@dmreg.com

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 produces what is widely considered the premier electric car because of its battery life and horsepower.

But Tesla 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."

Iowa joins other states in Tesla tussle

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.

Tesla test drives in Iowa ruled illegal

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 spokesperson for Tesla said the company does not believe the statutes apply because the company was not selling cars, only providing test drives. No other test drive events are planned in Iowa, she said.

Shares of Tesla, a company valued at $31.5 billion, were trading at $252.14 as of close Wednesday, up $1.73 cents for the day.

But don't worry; online sales legal

Despite the dispute over test drives, it's not illegal for Iowans to buy Tesla vehicles online or from a private seller, Steier said.

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

What makes Tesla so special?

Horsepower, battery life and the price tag all set the Tesla Model S apart from its competitors.

Backers say it's the first fully electric vehicle that can completely replace a gas-powered car. While other electric cars, with batteries that need charged every 50 to 100 miles, are practical for in-town use, the Model S can cover up to 300 miles in a single charge.

Tesla introduced its first all-electric sports car, the Roadster, in 2006. The Model S rolled out in June 2012 and last year was named Motor Trend and Automobile Magazine's car of the year.

The Model S offers horsepower that rivals gasoline sports cars, making it appealing to consumers turned off by the small motors in other electric vehicles.

Nabil Hanke, who converts gasoline cars to electric for a living, called the Tesla Model S a "cornucopia of subtleties." There isn't one thing that makes it stand out. It's fast, smooth, sleek, quiet and efficient, he said.

Side by side

2014 Tesla Model S (85 kWh battery)

Price: $73,570 (after $7,500 federal tax credit).

Range: 300 miles (at 55 mph).

Horsepower: 362.

2014 Nissan Leaf (Model S)

Price: $29,030.

Range: 84 miles.

Horsepower: 107.

Source: Kelly Blue Book

No change in sight for ban on Tesla's direct sales in Iowa

Iowa lawmakers say there is little appetite to change the rules that prompted state regulators to ban Tesla Motors from offering test drives here.

Current laws require car dealers to be licensed and prohibit auto manufacturers from selling directly to the public. Officials with the Iowa Department of Transportation say that means the electric carmaker can't offer test drives without receiving a license or opening a dealership here.

State Sen. Matt McCoy, chairman of the Senate Commerce Committee, test drove a Tesla last year in another state and said he hopes to buy one when the company comes out with a cheaper model. But the Des Moines Democrat said he thinks Tesla should follow the same rules that require other carmakers to sell through independent dealerships.

"I have mixed feelings about it because I really like the car and I really like what the car stands for," he said. "But in Iowa we tend to respect our system and the way it was set up, and I don't see any appetite to change that."

State Rep. Peter Cownie, chairman of the House Commerce Committee, said he hasn't heard from lobbyists for Tesla or Iowa's auto dealerships, an indication that there isn't much desire to change the rules to allow Tesla to sell directly to the public.

"You can't have two sets of rules," the West Des Moines Republican said. "That would create an unfair playing field for the small business owners and small car dealers."

— Joel Aschbrenner