Polestar will stop selling new vehicles in the US from the 2027 model year after the US Department of Commerce declined to grant it an exemption from a rule targeting Chinese-linked connected cars.
The premium brand said Wednesday that Commerce’s Bureau of Industry and Security would not give it an authorization under the Connected Vehicle Rule, which bars manufacturers owned or controlled by China from selling connected vehicles in the US starting with model year 2027.
That decision lands weeks after Volvo, which shares Polestar‘s ultimate owner, won the same authorization.
Both brands trace their control to China’s Geely Holding Group, and both build cars at the same plant in Ridgeville, South Carolina.
“The automotive industry is entering a new phase, based on regional dynamics. Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe,” CEO Michael Lohscheller said in a statement.
Lohscheller added that Polestar “will continue to invest in markets where we have opportunities to continue to grow, like Southeast Asia, Eastern Europe, Latin America and Canada.”
What Commerce Decided
The Connected Vehicle Rule, finalized by Commerce in January 2025, prohibits carmakers owned by, controlled by, or subject to the direction of China or Russia from knowingly selling connected vehicles in the US.
Software restrictions take effect with the 2027 model year, and hardware rules follow later in the decade.
The prohibition applies regardless of where a vehicle is built, so a car assembled in the US is still covered if its maker is deemed subject to Chinese control.
Commerce can issue company-specific authorizations that lift the ban for an individual manufacturer.
Volvo received one in May, after what it described as constructive discussions with Commerce over its governance, technology and data security.
The agency does not publish its authorization decisions.
A Geely Split Decision
Polestar was established as a premium electric brand by Volvo Cars and Geely in 2017 and listed on the Nasdaq in 2022 under the ticker PSNY.
Ownership has shifted steadily toward Geely‘s orbit since.
Volvo cut its stake to about 16% after distributing shares to its own investors, while PSD Investment, the personal vehicle of Geely founder Li Shufu, has become the largest holder at roughly 44%.
Geely and Li Shufu together control about two-thirds of the company.
That structure places Polestar squarely inside the rule’s definition of a manufacturer subject to Chinese control, the same test Volvo had to clear.
Volvo builds most of its cars in Sweden and assembles the EX90 and the Polestar 3 at Ridgeville.
Earlier this year the two companies said they would consolidate all Polestar 3 production in South Carolina, ending output of the model in China.
The shared line underscores how far the denial reaches: a US-built Polestar 3, rolling off the same plant as an authorized Volvo, will be blocked from sale once the 2027 model year begins.
What Happens to US Buyers
Polestar said it will keep selling its existing US stock of the Polestar 3 and Polestar 4 and will continue to support current owners, including access to its service network.
The brand leans on Volvo‘s retail and service infrastructure in the US, which limits the disruption for cars already on the road.
New inventory, however, will run down without replacement once 2027 models would normally arrive.
Polestar did not give a timeline for selling through remaining stock.
The Polestar 2, the brand’s original sedan, was built in China and had already been squeezed out of the US by tariffs before the connected-vehicle decision.
Europe Becomes the Center
Polestar framed the denial as a reason to lean harder into Europe, which it said accounts for close to 80% of retail sales.
Chief Executive Michael Lohscheller said the industry is entering “a new phase, based on regional dynamics,” pointing to Europe as the company’s main growth engine.
He named Southeast Asia, Eastern Europe, Latin America and Canada as other targets.
About 94% of Polestar‘s retail volume in the first quarter of 2026 came from outside the US.
European demand has been climbing, with first-quarter registrations rising in the UK and Germany, the brand’s core markets on the continent.
The company plans to build its coming Polestar 7, a compact SUV, in Europe.
Deliveries of the Polestar 5, a four-door grand tourer, are set to begin over the summer, with a new Polestar 4 variant due in the second half of the year and a redesigned Polestar 2 in 2027.
The Production Map
Polestar‘s manufacturing already spans three countries, a footprint built partly to dilute exposure to any single market’s trade policy.
The Polestar 2 is made at a Volvo plant in Taizhou, China.
Ridgeville builds the Polestar 3, where Volvo spent $118 million to add it, with Chengdu output being phased out under the consolidation plan.
In South Korea, the Polestar 4 entered production in Busan in a venture with Geely and Renault Korea.
The planned Polestar 7 would extend assembly into Europe for the first time.
That diversification softened the tariff blow but offered no protection against a rule keyed to ownership rather than origin.
Caught by a Software Rule
Polestar has built its cabin technology around Google rather than in-house systems, a strategy that distinguishes it from Tesla and from Chinese rivals that write their own software.
The brand began rolling out Google’s Gemini assistant across its lineup this year, starting in the US, and was the first automaker to put Google Maps live lane guidance in the driver display.
At its core, the rule targets vehicle connectivity and automated-driving software tied to Chinese-linked firms, the layer where modern cars collect and transmit data.
Polestar‘s reliance on Google software did not shield it, because the rule reaches the manufacturer’s ownership, not only the code in the car.
Outlook
Polestar entered 2026 off record sales, with global retail volume rising to about 60,100 units in 2025 from roughly 44,900 a year earlier.
Hoever, the growth has come almost entirely from outside the US.
