diff --git a/ansible/action_plugins/__init__.py b/ansible/action_plugins/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/ansible/action_plugins/tenks_update_state.py b/ansible/action_plugins/tenks_update_state.py
index 2efa503..3d23a1a 100644
--- a/ansible/action_plugins/tenks_update_state.py
+++ b/ansible/action_plugins/tenks_update_state.py
@@ -86,7 +86,7 @@ class ActionModule(ActionBase):
                 old_idxs = {}
             new_idxs = {}
             next_idx = 0
-            used_idxs = old_idxs.values()
+            used_idxs = list(old_idxs.values())
             for name, dev in six.iteritems(specified_mappings):
                 try:
                     # We need to re-use the IDXs of any existing physnets.
@@ -97,8 +97,7 @@ class ActionModule(ActionBase):
                         next_idx += 1
                     used_idxs.append(next_idx)
                     idx = next_idx
-                finally:
-                    new_idxs[name] = idx
+                new_idxs[name] = idx
             state[hostname]['physnet_indices'] = new_idxs
 
     def _process_specs(self, localhost_vars, args):
diff --git a/test-requirements.txt b/test-requirements.txt
index aa79722..f41301b 100644
--- a/test-requirements.txt
+++ b/test-requirements.txt
@@ -4,3 +4,6 @@
 
 ansible-lint>=3.0.0 # MIT
 flake8>=3.5.0 # MIT
+# Required for Python 2
+mock>=2.0.0 # BSD
+stestr>=1.0.0 # Apache-2.0
diff --git a/tests/__init__.py b/tests/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/tests/test_tenks_update_state.py b/tests/test_tenks_update_state.py
new file mode 100644
index 0000000..8908085
--- /dev/null
+++ b/tests/test_tenks_update_state.py
@@ -0,0 +1,81 @@
+# Copyright (c) 2018 StackHPC Ltd.
+#
+# Licensed under the Apache License, Version 2.0 (the "License"); you may
+# not use this file except in compliance with the License. You may obtain
+# a copy of the License at
+#
+#      http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS, WITHOUT
+# WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied. See the
+# License for the specific language governing permissions and limitations
+# under the License.
+
+from __future__ import absolute_import
+import imp
+import os
+import sys
+
+import unittest
+
+# Python 2/3 compatibility.
+try:
+    from unittest.mock import MagicMock
+except ImportError:
+    from mock import MagicMock
+
+
+# Import method lifted from kolla_ansible's test_merge_config.py
+PROJECT_DIR = os.path.abspath(os.path.join(os.path.dirname(__file__), '../'))
+PLUGIN_FILE = os.path.join(PROJECT_DIR,
+                           'ansible/action_plugins/tenks_update_state.py')
+
+tus = imp.load_source('tenks_update_state', PLUGIN_FILE)
+
+class TestTenksUpdateState(unittest.TestCase):
+    def setUp(self):
+        # Pass dummy arguments to allow instantiation of action plugin.
+        self.mod = tus.ActionModule(None, None, None, None, None, None)
+
+        # Minimal inputs required.
+        self.node_types = {
+            'type0': {
+                'memory_mb': 1024,
+                'vcpus': 2,
+                'volumes': [
+                    {
+                        'capacity': '10GB',
+                    },
+                ],
+                'physical_networks': [
+                    'physnet0',
+                ],
+            },
+        }
+        self.specs = [
+            {
+                'type': 'type0',
+                'count': 2,
+                'ironic_config': {
+                    'resource_class': 'testrc',
+                },
+            },
+        ]
+        self.hypervisor_vars = {
+            'foo': {
+                'physnet_mappings': {
+                    'physnet0': 'dev0',
+                },
+                'ipmi_port_range_start': 100,
+                'ipmi_port_range_end': 102,
+            },
+        }
+
+    def test__set_physnet_idxs_no_state(self):
+        state = {}
+        self.mod._set_physnet_idxs(state, self.hypervisor_vars)
+        expected_indices = {
+            'physnet0': 0,
+        }
+        self.assertEqual(state['foo']['physnet_indices'], expected_indices)
diff --git a/tox.ini b/tox.ini
index f0c4e94..baa4108 100644
--- a/tox.ini
+++ b/tox.ini
@@ -21,6 +21,8 @@ deps =
     -c{env:UPPER_CONSTRAINTS_FILE:https://git.openstack.org/cgit/openstack/requirements/plain/upper-constraints.txt?h=stable/rocky}
     -r{toxinidir}/requirements.txt
     -r{toxinidir}/test-requirements.txt
+commands =
+  stestr run {posargs}
 
 [testenv:pep8]
 basepython = python2.7