North Dakota judge sends Tesla dealership dispute back to administrative process

Tesla’s effort to fight North Dakota’s franchise dealership laws has hit another hurdle after a state judge declined to rule on the merits of the case, instead directing the EV maker to pursue the administrative appeals process before returning to court.

How Tesla’s North Dakota dealership battle began

The dispute started when Tesla applied to open dealerships in Fargo and Bismarck. In 2024, the North Dakota Department of Transportation (NDDOT) denied the applications, citing a state law that prohibits vehicle manufacturers from owning dealerships.

Under North Dakota’s franchise system, automakers are generally required to sell vehicles through independently owned dealers rather than directly to consumers.

Tesla challenged that decision, arguing that its direct-to-consumer business model places it outside the state’s legal definition of a manufacturer. The company also claimed NDDOT improperly refused to consider an exemption that allows manufacturers to operate dealerships when no suitable independent dealer is available.

Judge directs Tesla to appeal process first

However, South Central Judicial District Judge Bonnie Storbakken has now ruled that the dispute should first be handled through the state’s administrative appeals process.

In her order, Storbakken noted that even if the court agreed with Tesla’s argument that it is not a manufacturer under state law, the company would still need approval from NDDOT and would have to satisfy other licensing requirements. As a result, a court ruling on that single issue would likely not resolve the broader dispute.

Instead, the judge said Tesla should appeal the license denial through the established administrative channels. If the appeal is unsuccessful, the company can then seek judicial review of the agency’s decision.

“None of the parties have indicated to the court why this would be an inadequate or inappropriate remedy,” Storbakken wrote. (via North Dakota Monitor)

The decision does not address the underlying question of whether Tesla’s direct-sales model complies with North Dakota law, nor does it determine whether the company qualifies for the exemption it has sought.

Direct-sales battle far from over

The ruling represents a procedural setback rather than a final defeat for Tesla. The company has spent more than a decade challenging franchise dealership restrictions across the United States, often arguing that laws written for traditional automakers do not fit its direct-sales model.

Neither Tesla nor the North Dakota Attorney General’s Office commented publicly on the judge’s decision.

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