The largest electric vehicle manufacturer in the United States is suing the state of North Dakota in its bid to open a pair of auto dealerships in Bismarck and Fargo.
The case, filed by Tesla, was assigned to South Central Judicial District Judge Bonnie Storbakken after a hearing Monday.
North Dakota law prohibits automakers from owning auto dealerships and requires them to sell their products to franchised dealers for resale to consumers. Tesla, unlike conventional car manufacturers such as Ford or Chevrolet, operates its own car dealerships and sells directly to consumers.
Tesla is asking the court to declare the company does not fall within the definition of a manufacturer under state law. The term is defined as a person who assembles or imports a motor vehicle and sells it to dealers within 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 its case is an exception to the statute.
“Tesla just wants to be able to sell its vehicles in North Dakota and not force customers who want to buy Tesla vehicles to drive 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 say there are more than 800 Tesla vehicles registered in North Dakota. Those cars were purchased elsewhere, in one of the more than 30 states where Tesla is licensed to operate as a dealer because they were not available for sale in North Dakota.
Assistant Attorney General Michael Pitcher argued that Tesla is asking the court to create a third type of entity, beyond automakers 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 this law simply by choosing not to franchise its dealers,” Pitcher said. “That would defeat the entire regulatory structure that the Legislature passed.”
Pitcher said Tesla’s direct-to-consumer business model was a voluntary decision by the company. The attorney argued that North Dakota law prohibits the practice and that Tesla has the right to change its practices to comply with North Dakota rules.
“Tesla can operate in North Dakota like any other manufacturer. They can appoint dealers, they can enter into franchise agreements and they can sell through it,” Pitcher said. “So the law doesn’t take away Tesla’s ability to do business. It just regulates the vehicle distribution model.”
A Tesla electric vehicle charging station is ready for use in Bismarck on February 19, 2024. (Photo by Michael Achterling/North Dakota Monitor)
Tesla would not automatically receive licenses for the two proposed dealerships if the company wins the case. Holtzblatt said the court’s favorable ruling will allow the company to reapply and have a chance to convince the North Dakota Department of Transportation that it meets all other legal requirements for a dealer license.
Even if the court disagrees with Tesla’s reading of the law, Holtzblatt said it would be helpful to have a solution to the situation sooner rather than later. The company initially applied for dealer licenses for two dealers on September 19, 2024.
“We are anxious to get to the resolution of those legal questions. Obviously we believe that the statutes support the interpretation that we put forward,” Holtzblatt said. “Frankly, if the court doesn’t agree, we just want to get that answer soon so we can try to move the process forward.”
North Dakota does lagging behind other states in adopting electric vehicles and building the necessary infrastructure. According to the company’s website, there are five turbocharger locations for Tesla vehicles in North Dakota. US Department of Energy site list 277 electric vehicle charging ports at 108 locations in the state, primarily along the east-west Interstate 94 and US Route 2 corridors.
Storbakken did not advise on the matter and did not give a timeline for when she might make a decision.
North Dakota Monitor reporter Jacob Orledge can be reached at jorledge@northdakotamonitor.com.
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