Tesla Motors had its request for a second dealership license turned down by the state of North Carolina.

The North Carolina Division of Motor Vehicles ruled Friday that Tesla did not meet the requirements to become exempt from state law prohibiting manufacturers from owning dealerships. Tesla would need to work through a third-party dealership group, North Carolina’s DMV said.

Tesla has been operating a retail store in Raleigh, N.C. The company had hoped to open a second dealership store at its existing gallery and service center in Matthews, N.C., a suburb of Charlotte.

The decision in North Carolina is one of many legal battles between Tesla and dealer groups in states across the country. Tesla argues that it owns and operates its own dealerships where it can more effectively retail its vehicles. Dealer groups argue that it violates state laws and that Tesla’s direct-sales model hurts consumers.

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North Carolina agreed with arguments submitted by four dealership groups opposing granting of the license. That group included Hendrick Automotive Group and Sonic Automotive Inc., which are ranked among the largest dealer networks in the U.S.

The state DMV dismissed Tesla’s argument that its Matthews locations should be exempt from the state’s ban on manufacturer-owned dealerships. The North Carolina DMV ruling says that there are “at least three independent dealers” in the market that would be able to own and operate a Tesla dealership “in a manner consistent with the public interest,” meaning the exemption would not apply.

Automotive News