Tesla sues North Dakota as it seeks to open car dealerships in state
The largest electric vehicle maker in the United States is suing the state of North Dakota over its quest to open a pair of car dealerships in Bismarck and Fargo.
Tesla’s lawsuit is in the hands of South Central Judicial District Judge Bonnie Storbakken following a hearing on Monday.
North Dakota law prohibits vehicle manufacturers from owning car dealerships and requires them to sell their products to franchised dealers for resale to consumers. Unlike traditional vehicle manufacturers such as Ford or Chevrolet, Tesla operates its own car dealerships and sells directly to consumers.
Tesla is asking the court to declare that the company does not meet the definition of a manufacturer under state law. This term is defined as a person who assembles or imports a motor vehicle and sells it to dealers in the state for resale.
If the court disagrees and Tesla is determined to be a manufacturer under state law, the company will ask the court to determine whether an exception in the law applies to their case.
“Tesla just wants to be able to sell its vehicles in North Dakota and not force customers who want to buy a Tesla vehicle to go to Minnesota or another state to do so,” said Ari Holtzblatt, one of Tesla’s attorneys in the case.
Court documents filed by the company stated that more than 800 Tesla vehicles are registered in North Dakota. These vehicles were not offered for sale in North Dakota, so they were purchased elsewhere in one of the more than 30 states where Tesla is licensed to operate as a dealer.
Deputy Attorney General Michael Pitcher argued that Tesla is asking the court to create a third category beyond automakers and dealerships that sell to consumers, which the Legislature never intended when writing the law.
“Tesla’s interpretation would allow any manufacturer to avoid the law by choosing not to franchise its dealers,” Pitcher said. “This defeats the entire regulatory structure that the Legislature has adopted.”
Pitcher said Tesla’s business model of selling directly to consumers was a voluntary decision by the company. The lawyer argued that the practice was prohibited by North Dakota law and that Tesla had the authority to change the way it operated to comply with North Dakota rules.
“Tesla can operate in North Dakota the same way other manufacturers do: appoint dealers, enter into franchise agreements and make sales that way,” Pitcher said. “So the law does not eliminate Tesla’s ability to do business. It just regulates the distribution model of the vehicles.”
Tesla electric vehicle charging station ready for use in Bismarck on February 19, 2024. (Photo: Michael Achterling/North Dakota Monitor)
If the company wins the case, Tesla will not automatically receive licenses for the two dealerships it offers. Holtzblatt said the court’s favorable decision will allow the company to re-apply and give it the opportunity to convince the North Dakota Department of Transportation that it meets all other legal requirements for a dealership license.
Even if the court disagrees with Tesla’s reading of the law, Holtzblatt said it would be helpful to have a solution to this situation as soon as possible. The company first applied for two dealership licenses on September 19, 2024.
“We are a little concerned about resolving these legal questions. Frankly, we believe the law supports our proposed interpretation,” Holtzblatt said. “Honestly, if the court disagrees, we want to get that answer as soon as possible so we can try to move the process forward.”
It’s in North Dakota lagged behind other states Adoption of electric vehicles and creation of the necessary infrastructure. There are five supercharger locations for Tesla vehicles in North Dakota, according to the company’s website. US Department of Energy website listings 277 charging points for electric vehicles at 108 locations in the state, primarily along the east-to-west Interstate 94 and US Highway 2 corridors.
Storbakken took the matter to recommendation and did not offer a timeline for when he might make a decision.
North Dakota Monitor reporter Jacob Orledge can be reached at jorledge@northdakotamonitor.com.
