Tesla Inc. reached a settlement with Michigan to allow the electric-vehicle maker to sell and service its cars in the backyard of the Detroit 3 automakers, the Associated Press reported Jan. 21, citing a source familiar with the matter.

The settlement would end a 2016 lawsuit filed by Tesla against the state officials over a law banning companies from selling cars directly to consumers instead of through franchised dealerships.

In the lawsuit, Palo Alto, Calif.-based company dubbed the law backed by major carmakers and dealerships unconstitutional and "anti-Tesla." Michigan also stopped Tesla from opening service centers. As a result, consumers were forced to buy and service their Tesla cars from a nearby state.

The settlement, which is likely to be announced Jan. 22, would still require customers to acquire titles from another state and then transfer them to Michigan, according to the report.

Shares of Tesla jumped 7.19% to $547.20 on Jan. 21.