Judge kicks Tesla’s North Dakota dealership dispute to administrative appeal 

A state judge declined to decide a licensing lawsuit between Tesla and the North Dakota Department of Transportation, directing the parties to first let the matter go through the administrative appeals process.

The case stems from Tesla’s efforts to establish car dealerships in Fargo and Bismarck.

The company in September 2024 applied to the North Dakota Department of Transportation for two motor vehicle dealer licenses, but was denied on the grounds that under state law, vehicle manufacturers cannot own car dealerships. Instead, they must sell their products through independent, franchised dealerships. The state says the purpose of this law is to protect consumers and to promote fair competition.

Unlike many other car dealerships, Tesla dealerships are owned and operated by the company. The North Dakota Department of Transportation determined that Tesla is a manufacturer under state law and therefore is disqualified from licensure.

This prompted Tesla to sue the agency in state court in June 2025, arguing that it does not fit this definition and should not be barred from obtaining dealership licenses. The statute defines manufacturer as “any person that is engaged in the business of manufacturing or assembling new motor vehicles or any person that in whole or in part offers for sale, sells, or distributes any new motor vehicle to a new motor vehicle dealer.” Tesla claims that because it has never intended to sell its cars to dealers for resale, it cannot be considered a manufacturer.

The Department of Transportation says that Tesla “plainly” falls under this definition and that it was right to deny the company’s applications.

Tesla in the lawsuit also notes that an exemption in state law allows manufacturers to be licensed if there is no satisfactory third-party dealer available to sell the cars. It claims that the Department of Transportation wrongfully refused to consider whether Tesla qualifies for this exemption. The company asks that if the court does not find Tesla isn’t a manufacturer, that it direct the agency to determine whether Tesla could fit the exemption.

The agency previously found the exemption did not apply to Tesla. In court records, the Department of Transportation wrote that the exemption is only meant to apply when manufacturers temporarily take control of existing dealerships.

South Central Judicial District Judge Bonnie Storbakken last week decided that the dispute should not move forward in her court.

Storbakken found that even if she determines that Tesla is not a manufacturer, the North Dakota Department of Transportation would still have to determine that Tesla meets all other requirements for licensure. She said if she were to rule only on the statutory definition of car manufacturers, it would likely lead to further litigation over other parts of the statute.

Storbakken told the parties that the appropriate remedy for a license denial is to seek an administrative appeal. If that is denied, the company can ask the courts to review the decision, she added.

“None of the parties have indicated to the court why this would be an inadequate or inappropriate remedy,” Storbakken wrote.

Tesla did initially appeal the denial of its license applications to state court, but the company later voluntarily dismissed the case. The parties mutually agreed that Tesla would bring the current suit challenging the underlying licensure law instead.

The North Dakota Attorney General’s Office declined to comment on Storbakken’s order. Attorneys for Tesla did not immediately respond to a request for comment on the case.

Reach North Dakota Monitor reporter Mary Steurer at [email protected]