Tesla‘s lawsuit against the state of North Dakota — filed after the state rejected its applications to open direct-to-consumer showrooms — is moving forward in court.
The company’s applications to open stores in Bismarck and Fargo, filed in 2024, were denied because state law prohibits vehicle manufacturers from selling directly to consumers.
Tesla first sued the North Dakota Department of Transportation in November, with the first hearings scheduled for December, according to The Bismarck Tribune.
The state argued that this separation between manufacturers and dealerships is necessary to protect both franchise dealers and consumers.
However, Tesla has appealed, claiming it should be exempt from the law since its sales model relies exclusively on direct-to-consumer sales throughout the United States — a model also used by other EV makers, such as Lucid and Rivian.
The case is now in the hands of South Central Judicial District Judge Bonnie Storbakken, following a hearing on Monday — according to local media outlet Minot Daily News.
One of the attorneys on the case, Ari Holtzblatt, argued that Tesla just wants to “be able to sell its vehicles in North Dakota, and not force customers who would wish to purchase a Tesla vehicle to have to drive to Minnesota or another state to do it.”
Holtzblatt said a favorable ruling by the court would allow the company to reapply and give it the opportunity to convince the North Dakota Department of Transportation that it meets all the other legal requirements for a dealership license.
“We’re kind of anxious to get resolution on those legal questions. Obviously we believe that the statutes favor the interpretation we’ve offered,” Holtzblatt said.
Even “if the court disagrees, we just as soon like to get that answer so we can try to move the process forward,” the attorney added.
The judicial battle comes as EV makers push for direct sales rights across the country, challenging the traditional sales ban outside of franchised dealerships that many states still enforce.
State’s View
According to North Dakota’s Assistant Attorney General Michael Pitcher, Tesla is asking the court to create a third category of entities — beyond car manufacturers and franchised dealerships that sell to consumers — that the Legislature never intended when it wrote the law.
“Tesla’s interpretation would allow any manufacturer to avoid the statute simply by choosing not to franchise its dealers,” Pitcher said. “That would defeat the whole regulatory structure that the Legislature has adopted.”
The attorney noted that the company’s business model of selling directly to consumers is a voluntary decision.
Pitcher further argued that the practice is barred by North Dakota law, and that Tesla has the option to change how it operates in order to comply with the state’s rules.
“Tesla can operate in North Dakota the same way that every other manufacturer does. They can appoint dealers, they can enter into franchise agreements, and they can sell through that,” he stated.
According to the attorney, “the statute is not taking away Tesla’s ability to do business. It’s just regulating the distribution model of vehicles.”
Previous Claims
Last November, the company argued in the lawsuit that it does not technically meet the definition of a “manufacturer” because it does not sell new vehicles through third-party dealerships.
North Dakota law defines a “manufacturer” as “any person who manufactures, assembles, or imports and sells new motor vehicles to new vehicle dealers for resale in the state.”
Tesla contends that even if it fits this definition, it should still be allowed to seek an exemption from the Department of Transportation, which permits manufacturers to operate a dealership if no independent dealer is available.
“Traditional motor vehicle manufacturers sell their vehicles through independent franchised dealers,” the company wrote. “Tesla, by contrast, sells its vehicles directly to customers throughout the United States.”
As a result, the company has no franchised dealerships in the state, it argued.
Assistant Pitcher, however, had already stated then that the exemptions in state law do not apply to Tesla.
They are intended only for temporary situations — such as when a manufacturer must briefly take over an existing dealership to prevent market disruptions.
Tesla, by contrast, was seeking to establish its own permanent dealerships.
Unconstitutionality Claims
Tesla also alleged back then that the Department of Transportation’s rejection violates the North Dakota Constitution, citing clauses that protect the “right to earn a livelihood” and the “right to equal protection.”
According to the company, North Dakota’s law unconstitutionally favors franchised dealerships.
“To the extent that the North Dakota Legislature or the Department seek to protect franchised dealerships from competition, that is not a reasonable legislative goal,” the filings read.
The Assistant Attorney General countered that establishing a franchise system is a legitimate way for the state Legislature to protect vehicle dealerships and does not infringe on any constitutional rights.
“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 wrote, adding that “Tesla, as a manufacturer, falls squarely within that concern.”
Tesla in ND
Court documents filed by the company said there are more than 800 Tesla vehicles registered in North Dakota.
Those vehicles were purchased elsewhere — in one of the more than 30 states where Tesla is licensed to operate as a dealer — because they are unavailable for sale in North Dakota.
According to Tesla‘s website, there are five Supercharger locations in North Dakota, despite the company not having any official sales point in the state.
Customers can purchase its models through Tesla‘s website, with vehicles being delivered in the state.
Customers can also pick up the vehicle at other showrooms across the country.
As of Thursday, a customer ordering a Model Y — from the entry-level trim to the Premium AWD — faces a delivery waiting time of 3–5 weeks, the same as in states such as New York, Kansas or Iowa.
Delivery waiting times are shorter in zones with Tesla‘s manufacturing footprint, including Texas and California, where they drop to 2–3 weeks.
The Performance version is scheduled for delivery between May and June across the country.
Direct Sales Ban in Other States
North Dakota isn’t the first state where Tesla has challenged dealership laws.
The company has also filed petitions against similar direct-sales bans in Louisiana, Wisconsin, and several other states.
North Dakota and Louisiana have some of the lowest EV adoption rates in the country, with electric vehicles accounting for just 1.3% and 1.4% of new car sales, respectively.
Only Mississippi is lower, at 1.2%.
Tesla is not allowed to sell directly to customers in 14 states — including Alabama, Arkansas, Connecticut, Iowa, Kansas, Louisiana, Nebraska, New Mexico, North Dakota, Oklahoma, South Carolina, Texas (where part of its manufacturing base is located), West Virginia and Wisconsin.
The company also faces restrictions in other states that fall short of outright bans.
New York, despite allowing direct sales, has imposed a physical retail cap on Tesla showrooms. Customers can order online or visit one of the five permitted stores.
Washington
Earlier this year, Rivian and Lucid secured a win in Washington, gaining the equivalent status to Tesla — previously the only electric vehicle manufacturer allowed to operate showrooms with direct sales in the state.
Washington State has enacted Senate Bill 6354, allowing select EV manufacturers — including Rivian and Lucid — to sell directly to consumers, extending a privilege previously granted only to Tesla in 2014.
Governor Bob Ferguson signed the bill on March 24 after it passed 47-2 in the Senate and 84-9 in the House.
The legislation, the result of negotiations between the Washington State Auto Dealers Association and the EV makers.
It limits direct sales to US-based, BEV-only companies with no prior franchise agreements, at least one in-state service facility, and a minimum of 300 vehicles registered in Washington as of January 1, 2026.
It also bars legacy automakers from using EV subsidiaries to bypass franchised dealers — something that VW Group‘s Scout Motors has tried to do in other states.
The Alliance for Automotive Innovation opposed the bill, with state affairs senior director Curt Augustine arguing that all automakers should “operate under the same set of rules” and warning that the carve-out could eventually benefit Chinese EV makers entering the US.
Iowa
Rivian has also supported a similar move in Iowa, applauding the introduction of Iowa Senate Study Bill 3067 — which the company said “will allow Iowans the freedom to purchase electric vehicles directly from the manufacturer.”
The bill was under review by the Iowa Senate Commerce Committee at the time of Rivian‘s statement in February.
According to local media outlet Des Moines Register, while the bill advanced from the subcommittee, senators acknowledged they didn’t know whether it had the support to become law this year.
Sen. Jason Schultz said the bill would advance to the full Senate Commerce Committee, and that he would give an “honest, both sides of the issue” update to his fellow committee members when they meet privately to discuss it before taking a vote.
Beyond that, he said, “I don’t know what the House is going to do.”
There have been no additional actions, votes, committee reports, or floor consideration since then.
Official legislative records still list the bill as “referred to Commerce,” with the subcommittee recommendation as the last step.
It was never renumbered as a regular Senate File, never voted on by the full committee, and never advanced to the Senate floor or House.
