The US government has denied Polestar authorization to sell its electric vehicles in the country starting in 2027. (Illustrative AI-generated image).
US Denies Polestar Authorization to Sell Cars from 2027
The US government has effectively banned Polestar from selling new cars in America starting in 2027. This decision targets vehicles with Chinese connections and marks a significant setback for the electric vehicle brand’s expansion plans. The US Commerce Department declined to authorize imports of new Polestar vehicles from model year 2027 onward, citing a federal rule that bans connected cars from automakers with Chinese links due to national security risks. The rule, formally known as the “Securing the Information and Communications Technology and Services Supply Chain” regulation, was implemented in 2025 and targets vehicles that incorporate certain hardware or software from China, including components used for connectivity features like navigation, infotainment, and telematics. Polestar’s Chinese ownership under Zhejiang Geely Holding placed it squarely within the scope of this restriction, as authorities determined that its vehicles could expose sensitive data or be vulnerable to remote manipulation. The denial was announced without a formal public hearing, though Polestar had engaged in consultations with Commerce Department officials over the preceding months. According to sources familiar with the process, the company submitted detailed compliance documentation, including security assessments of its software ecosystem and proof of data localization measures, but the government ultimately deemed these insufficient. The decision effectively bars Polestar from offering any new vehicles to US consumers after the current model year ends.
Polestar, which was spun out of Volvo Cars and is wholly owned by Zhejiang Geely Holding-a Chinese conglomerate-now faces an effective exit from the US market. The company will continue to sell its remaining stock of Polestar 3 and Polestar 4 SUVs and provide after-sales service for existing customers, including software updates, warranty repairs, and parts availability. However, future models like the Polestar 5 sedan and Polestar 6 roadster will not be sold in the US, as the denial blocks their import authorization. The Polestar 3, a midsize electric SUV that debuted in 2023, and the Polestar 4, a coupe-like SUV launched in 2024, represent the brand’s core US lineup, and their continued sale until stock runs out offers a temporary reprieve. Polestar had invested heavily in establishing a US dealer network, with retail locations in major metropolitan areas such as Los Angeles, New York, and San Francisco, as well as partnerships with service centers. The brand also operated a direct-to-consumer sales model similar to Tesla’s, which could now be wound down. Employees at Polestar’s US headquarters and showrooms face uncertainty, though the company has not announced layoffs yet. The loss of the US market is particularly painful because Polestar had positioned itself as a premium EV competitor to Tesla, BMW, and Mercedes-Benz, targeting affluent buyers with a design-forward brand image. Without US sales, Polestar’s global sales targets-which had been ambitious, aiming for 150,000 annual deliveries by 2025-will require downward revision.
The decision comes just weeks after the Commerce Department authorized Volvo-also owned by Geely-to import its model year 2027 vehicles. This contrast highlights the nuanced application of the connected vehicle rule, which appears to differentiate between brands based on their perceived Chinese ties. Volvo, while majority-owned by Geely, is headquartered in Sweden and manufactures vehicles primarily in Europe and the US, with a long history separate from its Chinese parent. Volvo’s US production facilities, including a plant near Charleston, South Carolina, help it qualify as a less direct security risk. Polestar, by contrast, was established in 2017 as a wholly owned subsidiary of Geely with its operational base in China, and its vehicles are partly manufactured in China (the Polestar 3 is built in South Carolina, but the supply chain remains heavily tied to Chinese partners). The rule’s criteria for assessing Chinese links are not publicly detailed, but they appear to consider ownership structure, manufacturing locations, and the origin of critical components such as batteries and connectivity modules. Polestar had been working with US authorities to meet regulations but was ultimately unsuccessful in securing authorization. The company offered to implement firmware restrictions, data encryption, and third-party audits, but these concessions were rejected. The Volvo authorization suggests that Geely’s brands are being evaluated case by case, with Polestar deemed too closely integrated with Chinese technology.
According to Reuters, Polestar states that the Trump administration is forcing it to end US sales. This political angle underscores the broader trade tensions between the US and China, particularly in the automotive sector. Polestar CEO Michael Lohscheller was quoted in internal communications as expressing disappointment, though specific remarks are not public. CarBuzz’s coverage emphasizes that Polestar vehicles are considered too Chinese to sell in America, reflecting the core reason for the ban. Investing.com frames the decision as the latest strike against China-made EVs, part of a series of US actions targeting Chinese electric vehicle manufacturers. These actions include maintaining 100% tariffs on Chinese-made EVs and restrictions on Chinese battery components under the Inflation Reduction Act. GuruFocus reports that Polestar is strengthening its focus on Europe following the US denial, a logical pivot given its strong brand presence there and the loss of its US ambitions. Europe has been Polestar’s primary market, accounting for the majority of its global sales, with models like the Polestar 2 performing well in Sweden, Norway, Germany, the Netherlands, and the UK. The company also sees potential in expanding to other regions such as South Korea, Australia, and the Middle East, where demand for premium EVs is growing. However, competition in Europe is intensifying as legacy automakers like Volkswagen and BMW ramp up EV offerings, and Chinese brands such as BYD and NIO are also entering the market.
The connected vehicle rule, which took effect in 2025, prohibits the import or sale of vehicles with certain Chinese-made components or software that could pose security risks. The rule applies to vehicles with Chinese ownership or significant Chinese supply chain links, covering not only the brand’s Chinese parentage but also components sourced from Chinese suppliers. It mandates that manufacturers must provide a detailed security plan and obtain authorization from the Commerce Department, a process that can take months. Polestar’s ownership by Geely, a Chinese company, made it a direct target of this regulation, despite its Swedish heritage and US manufacturing base. The rule also extends to software used for over-the-air updates, remote diagnostics, and autonomous driving features, all of which are common in modern EVs. The denial marks a significant blow to Polestar’s global expansion strategy, as the US was a key market for the brand’s growth, representing roughly 20% of its planned global deliveries. Polestar had invested tens of millions of dollars in US marketing, showrooms, and service infrastructure, much of which may now be repurposed or written off. The company had also begun producing the Polestar 3 at Volvo’s plant in South Carolina to address local content requirements, but this manufacturing effort was not enough to overcome the security concerns tied to its software architecture, which integrates Chinese-developed cloud services and telematics platforms.
Polestar had planned to launch several new models in the US, including the Polestar 5, a high-performance sedan built on a bespoke platform, and the Polestar 6, an electric roadster with a retractable hardtop. These models were expected to compete with luxury EVs from Tesla, BMW, and Mercedes-Benz, leveraging designs by renowned automotive designers and advanced battery technology. The Polestar 5, codenamed Project 6, was to offer up to 900 horsepower and a range of over 400 miles, positioning it against the Tesla Model S Plaid and Porsche Taycan Turbo. The Polestar 6, a two-seat roadster, was slated for production in limited numbers and aimed at collectors. The denial means these vehicles will not be available to American consumers, potentially impacting Polestar’s revenue and market share. Analysts estimate that the US market could have contributed 30,000 to 40,000 units annually once the lineup was complete. Polestar’s order backlog in the US, which includes reservations for the Polestar 5 and 6, will be cancelled, and deposits refunded. The company will now focus on Europe, where it has a stronger foothold and where regulations are less restrictive regarding Chinese ownership. European Union regulations, while imposing tariffs on Chinese-made EVs (currently at 17.8% for Geely brands), do not prohibit sales based on data security grounds, and Polestar’s European manufacturing base (the Polestar 3 is also built in South Carolina, but future models may be produced in Europe) could help it avoid additional duties.
The decision also has implications for the broader EV market. It signals that the US is taking a hard line against Chinese-linked automakers, which could affect other brands with similar ties. For example, BYD, another Chinese automaker, has faced scrutiny in the US market and has not yet launched passenger vehicles there, partly due to tariff barriers. The rule could also impact suppliers and manufacturers that rely on Chinese components, potentially disrupting supply chains for connected features. For instance, US automakers that source 5G modules, cameras, or infotainment systems from Chinese firms like Huawei or Baidu may need to switch to alternative suppliers or redesign their systems. The ruling also raises questions about the treatment of other Geely-owned brands, such as Lotus, which also has Chinese ownership but may fare differently if it can demonstrate a sufficiently independent supply chain. The Polestar case may serve as a bellwether for future decisions, encouraging automakers to accelerate efforts to diversify their component sourcing away from China. Industry bodies like the Alliance for Automotive Innovation have expressed concerns that such regulatory uncertainty undermines investment in US markets, but national security advocates support the rule as necessary to protect critical infrastructure from espionage or cyberattacks.
Polestar’s exit from the US market is a significant development in the ongoing trade war between the US and China. The Trump administration has imposed tariffs on Chinese goods and taken steps to limit Chinese influence in critical industries, including technology and automotive. The connected vehicle rule is part of these efforts, aiming to protect US national security by reducing reliance on Chinese-made parts and software. The timing of the decision-just weeks before a potential end-of-year policy review-adds to the sense that the administration is tightening restrictions ahead of the 2028 election cycle. Polestar’s case is also being watched internationally: the European Union has been investigating whether to impose similar restrictions on connected vehicles from China, citing security risks, and could use the US precedent to justify its own rules. Meanwhile, China has retaliated by imposing anti-dumping duties on imported vehicles from the US and has threatened broader trade measures against American goods if the connected vehicle rule is enforced aggressively. These tensions could escalate into a full-blown trade war over EVs, affecting global supply chains and increasing vehicle prices for consumers.
For Polestar, the denial means a strategic pivot. The company will now concentrate on expanding in Europe, where it has already established a presence. Polestar has seen strong sales in countries like Sweden, Norway, Germany, and the Netherlands, and plans to launch new models there, such as the Polestar 5 and Polestar 6 in their European configurations. The company may also explore other markets, such as Asia (South Korea, Japan) and the Middle East (UAE, Saudi Arabia), to offset the loss of US sales. Polestar is reportedly in talks with distributors in several Asian countries and is considering a local assembly plant in South Korea to reduce tariff exposure. In Europe, Polestar benefits from a growing charging network and government incentives for EVs, but faces fierce competition from both European incumbents and Chinese newcomers. The company’s brand identity, which emphasizes design and sustainability (interiors made from recycled materials, vegan leather, etc.), should help differentiate it. However, the loss of the US market will likely constrain Polestar’s path to profitability, which was already narrow given the high costs of EV development. The company, which went public via a SPAC merger in 2022, has yet to post a full-year profit, and its stock price has fallen by over 80% from its peak. The US denial could trigger further investor uncertainty, though some shareholders may see the European pivot as a more focused strategy.
The decision has drawn mixed reactions. Some industry analysts argue that the rule is necessary to protect US security and promote domestic manufacturing. They point to concerns about data privacy and the potential for China to use connected car systems for surveillance or remote shutdown. Others contend that it is protectionist and could harm competition, leading to higher prices for consumers and fewer choices in the EV market. Consumer advocacy groups note that the rule may inadvertently slow the adoption of EVs by removing a premium option from the market. Dealers who had invested in Polestar franchises are particularly affected; some may shift to other brands like Rivian or Lucid, while others face losses on dedicated showrooms. Polestar has expressed disappointment, stating that it had complied with all regulations and had hoped to continue selling in the US. The company is exploring legal avenues to challenge the decision, though the Commerce Department’s broad discretion under the rule makes a successful lawsuit uncertain. Polestar’s CEO has said the company will continue to evaluate all options, including potential modifications to its software supply chain that might satisfy US authorities at a later date, but no timeline has been given.
In summary, the US denial of Polestar’s authorization to sell cars from 2027 is a landmark decision that reflects the deepening divide between the US and China in the automotive sector. It marks the end of Polestar’s US ambitions for now and forces the brand to refocus on Europe. The decision also sets a precedent for other Chinese-linked automakers, potentially reshaping the global EV landscape as companies adjust their strategies to account for escalating regulatory barriers. As the US continues to tighten rules on technology transfers and data security, automakers with any Chinese ties will face increasing scrutiny, and consumers may see fewer choices in the premium EV segment. Polestar’s future now hinges on its ability to thrive in Europe and new markets, while the broader industry watches to see whether other brands share its fate.
