Tesla is once again going head-to-head with a state over its right to sell directly to customers, this time taking North Dakota to court after regulators refused to grant the company licenses to open two new locations in Fargo and Bismarck.
According to filings first reported by The Bismarck Tribune, the North Dakota Department of Transportation (NDDOT) denied Tesla’s dealership applications in 2024, pointing to a state statute that bars manufacturers from selling vehicles directly to consumers.
Tesla appealed that interpretation, arguing its business model is fundamentally different from the traditional automaker-dealer system the law was designed to regulate.
But after meeting with the company, the state held firm, prompting Tesla to file its lawsuit. A hearing before South Central District Judge Bonnie Storbakken is scheduled for December.
In its lawsuit, Tesla says it does not meet the state’s legal definition of a “manufacturer” because it does not sell vehicles to franchised dealerships—something the statute explicitly references. Instead, Tesla sells exclusively through its own retail network, which it says places it outside the traditional manufacturer category the law was meant to govern.
“Traditional motor vehicle manufacturers sell their vehicles through independent franchised dealers. Tesla, by contrast, sells its vehicles directly to customers throughout the United States. As a result, Tesla has no franchised dealerships in any state,” the company argues in its filings.
Tesla also claims the state’s denial violates several provisions of the North Dakota Constitution, including the right to earn a livelihood and equal protection, characterizing the rules as protections designed primarily to shield dealerships from competition.
The state has pushed back, with Assistant Attorney General Michael Pitcher saying that Tesla is interpreting the statute so narrowly that it undermines its purpose: to maintain a dealer-franchise system and prevent manufacturers from undercutting independent businesses.
“North Dakota’s laws are not designed to shield dealers from competition per se, but from exploitation by manufacturers who could otherwise undercut them,” Pitcher writes in the state’s filing. He added that allowing Tesla’s interpretation would let any automaker bypass the law simply by refusing to appoint franchise dealers.
The state also argues Tesla does not qualify for the law’s limited exemptions, which are intended only for temporary takeovers of existing dealerships—not for establishing a permanent factory-owned store network.
This dispute is part of a broader legal effort Tesla has been pursuing for more than a decade. Since 2013, Tesla has challenged dealership restrictions in dozens of states and has generally been successful, either winning exemptions in court or convincing legislatures to revise their laws.
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