Washington Locks Out Polestar: Chinese Ownership Costs Swedish EV Maker Its U.S. Future

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U.S. Slams the Door on Polestar

The Trump administration has forced Polestar out of the American car market. On Thursday, the U.S. Department of Commerce's Bureau of Industry and Security denied the company authorization under the Connected Vehicle Rule — a federal regulation that bars cars with software or hardware linked to China or Russia from American showrooms, starting with the 2027 model year.

Polestar is majority-owned by China's Geely Holding. That Chinese ownership connection is what triggered the ban. The company will be allowed to sell existing Polestar 3 and Polestar 4 inventory still in U.S. dealerships, and will keep its service network running for current customers. But no new model year 2027 vehicles will come to America. Polestar said it will not appeal the decision.

What Is the Connected Vehicle Rule?

The Connected Vehicle Rule was finalized in the final weeks of the Biden administration in January 2025 and has remained in force under President Trump. It targets what Washington calls a serious national security risk: modern cars are essentially rolling data centers, equipped with cameras, microphones, GPS systems, Bluetooth, and cellular connectivity.

The concern is that vehicles linked to Chinese-controlled software or hardware could collect sensitive data on American drivers and road infrastructure — and potentially transmit it to Beijing. Software restrictions apply from the 2027 model year onward. Hardware restrictions will follow in 2030.

Automakers with Chinese ties must apply for a specific authorization to continue selling in the U.S. Polestar applied — and was rejected. Its sister brand Volvo, also owned by Geely, received authorization in May, though the two companies differ in their corporate structure and software sourcing arrangements.

A Market Polestar Was Already Leaving Behind

The ban stings less than it might appear. According to the company's own figures, 94% of Polestar's retail sales in the first quarter of 2026 came from outside the United States. Europe already accounts for close to 80% of its global volume.

CEO Michael Lohscheller framed the exit as a strategic pivot rather than a defeat. "The automotive industry is entering a new phase, based on regional dynamics," he 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 company posted record sales in 2025 with more than 60,000 cars delivered, and Q1 2026 saw a new quarterly record of 13,126 deliveries — up 7% year-over-year. That said, gross margins turned negative in Q1 2026, falling to minus 3.2%, down sharply from a positive 10.3% a year earlier. Polestar has never turned a profit and has required repeated capital injections from Geely and its chairman Li Shufu.

Even U.S.-Built Cars Are Not Exempt

Perhaps the most striking aspect of the ruling is that it blocks even the Polestar 3 — the only Polestar model assembled in the United States, at a plant in South Carolina shared with Volvo. Under the Connected Vehicle Rule, what matters is not where a car is built, but who controls the software and corporate structure behind it.

Volvo had announced in March it would consolidate Polestar 3 production at its South Carolina facility rather than also building the model in Chengdu, China. A Volvo spokesperson told Reuters on Thursday that production in China has not yet been halted — and that it is too early to say whether the ban changes those plans.

A Warning Shot for the Industry

Polestar is not alone in facing scrutiny. Ford, Lincoln, and Buick are among the automakers scrambling to obtain U.S. government authorization for models that include Chinese-built variants sold in American showrooms. Lincoln's Nautilus and Buick's Envision — both made in China — now face the same regulatory hurdle.

Lawmakers are also pushing to tighten the rules further, and Chinese-made EVs already face steep import tariffs. The message from Washington is clear: the era of Chinese-linked vehicles in the American market is drawing to a close.

For Polestar, the road ahead runs through Europe, Southeast Asia, Eastern Europe, Latin America, and Canada. Its next fully new model — the Polestar 7 compact SUV — is planned for production at a Volvo facility in Slovakia.

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Sources:

1. Reuters – U.S. denies Polestar authorization to sell vehicles, latest strike against China-made cars: https://www.reuters.com/business/autos-transportation/us-denies-polestar-authorization-sell-vehicles-latest-strike-against-china-made-2026-06-25/
2. CNN Business – Polestar says the Commerce Department is banning U.S. sales of its cars: https://www.cnn.com/2026/06/25/business/polestar-us-ban
3. Electrek – Polestar barred from U.S. over the Chinese connected vehicle rule: https://electrek.co/2026/06/25/polestar-us-connected-vehicle-rule-europe/
4. InsideEVs – The U.S. Strongarms Polestar Out of the American EV Market: https://insideevs.com/news/799796/polestar-exits-us-market-authorization-denied/
5. Carscoops – The U.S. Just Banned Polestar From Selling New Cars, Even The One It Builds In America: https://www.carscoops.com/2026/06/polestar-us-sales-ban/

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