Tesla was forced to cancel the third of a planned three-day event where it was giving potential buyers the chance to take a test drive in the Model S after the Iowa Automobile Dealers Association (IADA) alerted the state’s Department of Transportation. Iowa law requires auto dealers to be licensed, and by offering test drives, Tesla was behaving as if it were a licensed dealer. As in virtually every other state, an automaker like Tesla is prohibited by law from selling directly to customers.
The president of the IADA said that Tesla “can’t just set up in a hotel parking lot and sell cars,” adding:
Independent dealers are aggressive in pricing against each other. If you wanted to buy directly from Chevy or Ford, the price on the sticker would be the price. … This is a regulated industry.
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In a statement of its own Tesla said that it did not believe that it was violating any state law because it was merely offering test drives and had no plans to sell any vehicles at the event. The company is not planning any future test drive events in Iowa.
One Iowa state legislator who has taken a test drive (in another state) in a Tesla told The Des Moines Register, “I have mixed feelings about it because I really like the car and I really like what the car stands for. 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.”
In other words, don’t look for Iowa to allow Tesla to set up a showroom or a direct dealership any time soon.
Tesla’s stock traded at $248.18 Friday morning, up about 0.4% in a 52-week range of $116.10 to $291.42.
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