diff --git a/pandas/io/sql.py b/pandas/io/sql.py
index 47642c2e2bc28..c9f8d32e1b504 100644
--- a/pandas/io/sql.py
+++ b/pandas/io/sql.py
@@ -507,10 +507,11 @@ def _engine_builder(con):
     if isinstance(con, string_types):
         try:
             import sqlalchemy
-            con = sqlalchemy.create_engine(con)
-            return con
         except ImportError:
             _SQLALCHEMY_INSTALLED = False
+        else:
+            con = sqlalchemy.create_engine(con)
+            return con
 
     return con
 
diff --git a/pandas/io/tests/test_sql.py b/pandas/io/tests/test_sql.py
index af8989baabbc0..e9d19bbd8be66 100644
--- a/pandas/io/tests/test_sql.py
+++ b/pandas/io/tests/test_sql.py
@@ -944,7 +944,7 @@ def test_sqlalchemy_type_mapping(self):
         self.assertTrue(isinstance(
             table.table.c['time'].type, sqltypes.DateTime))
 
-    def test_to_sql_read_sql_with_database_uri(self):
+    def test_database_uri_string(self):
 
         # Test read_sql and .to_sql method with a database URI (GH10654)
         test_frame1 = self.test_frame1
@@ -963,6 +963,12 @@ def test_to_sql_read_sql_with_database_uri(self):
         tm.assert_frame_equal(test_frame1, test_frame3)
         tm.assert_frame_equal(test_frame1, test_frame4)
 
+        # using driver that will not be installed on Travis to trigger error
+        # in sqlalchemy.create_engine -> test passing of this error to user
+        db_uri = "postgresql+pg8000://user:pass@host/dbname"
+        with tm.assertRaisesRegexp(ImportError, "pg8000"):
+            sql.read_sql("select * from table", db_uri)
+
     def _make_iris_table_metadata(self):
         sa = sqlalchemy
         metadata = sa.MetaData()