The US Commerce Department barred Polestar from selling new vehicles in America starting with the 2027 model year, blocking the Geely-owned Swedish EV brand under the Connected Vehicle Rule targeting Chinese technology.
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Polestar exits US market after Commerce Dept blocks 2027 sales
The US Commerce Department barred Polestar from selling new vehicles in America starting with the 2027 model year, blocking the Geely-owned Swedish EV brand under the Connected Vehicle Rule targeting Chinese technology.
"The automotive industry is entering a new phase, based on regional dynamics," Michael Lohscheller, chief executive officer of Polestar, said in a statement. "Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe."
The Bureau of Industry and Security declined to grant Polestar an authorization to sell vehicles in the US under the rule, which was finalized in January 2025 and prohibits the import or sale of vehicles equipped with certain Chinese- or Russian-linked hardware and software. The regulation covers Bluetooth, Wi-Fi, cellular connectivity, and satellite communications systems over concerns they could be used to collect sensitive data from American drivers. Polestar is majority-owned by China's Geely Holding, and the company's chairman is Li Shufu, Geely's founder — a nexus that triggered the restriction even though neither the Polestar 3 nor the Polestar 4 is built in China. The Polestar 3 is assembled at Volvo's plant in Charleston, South Carolina, while the Polestar 4 is built in Busan, South Korea.
The decision creates an uneven playing field among Geely's brands. Volvo Cars, also owned by Geely, received authorization from the Commerce Department in May to continue selling connected vehicles in the US, though it must demonstrate ongoing compliance across its lineup. Polestar said it will continue selling existing stock of the Polestar 3 and Polestar 4 in the US and will maintain its service network for current owners. But no new 2027-model-year vehicles will be offered unless the regulatory situation changes.
Europe becomes the focus
The US accounted for only 6 percent of Polestar's first-quarter global sales, while Europe represented 78 percent, according to the company. Polestar posted a record 2025 with more than 60,000 cars sold and revenue above $3 billion, and delivered 13,126 vehicles in the first quarter of 2026, up 7 percent from a year earlier. But gross margin swung to negative 3.2 percent in the first quarter from positive 10.3 percent a year earlier, reflecting pricing pressure, tariffs, and product mix. The company has required frequent capital support from Geely and underwent a reverse stock split last year to maintain its Nasdaq listing.
A precedent for Chinese-linked automakers
The Connected Vehicle Rule's application to Polestar — a Swedish-branded company with a US-built model — signals that ownership structure, not assembly location, determines eligibility. The average US tariff on Chinese-made vehicles already stands at 27.5 percent after the Section 301 duties imposed in 2018 and 2024, and the Biden-era connected-vehicle rule adds a further regulatory barrier. The previous escalation of tariffs on Chinese goods reduced bilateral auto trade by $3.2 billion over 12 months, according to Census Bureau data. Polestar said it will increase its strategic focus on Europe, expand its sales network there, and target growth markets including Southeast Asia, Eastern Europe, Latin America, and Canada. The Polestar 7 compact SUV, planned for production at Volvo's factory in Slovakia, will not be sold in the US under current rules.
This article is for informational purposes only and does not constitute investment advice.
[1] US Bans Geely Holding's Polestar from Selling New Vehicles in the US[2] Polestar Banned from Selling New Cars in the US Starting in 2027 - Autoweek[3] Polestar barred from US over the Chinese connected vehicle rule, a dangerous precedent - Electrek[4] Polestar says the Commerce Department is banning US sales of its cars - CNN[5] Trump admin bars Polestar from selling its new EVs in the US - TechCrunch
