Polestar Exits US Market As Connected Vehicle Rule Punishes Geely Ownership Over Factory Address

Polestar will stop selling new cars in the United States starting with the 2027 model year after the Commerce Department’s Bureau of Industry and Security declined to grant it authorization under the Connected Vehicle Rule. The Swedish brand announced the decision on Thursday, June 25. It is the first automaker pushed out of the American market by a rule that judges a car by who owns the company, not where the car is built.

That distinction is the whole story here. The Polestar 3 SUV is assembled in Ridgeville, South Carolina, at the same Volvo plant that builds the EX90. It is a US-made electric vehicle. It is now banned anyway, because Polestar is majority-owned by China’s Geely. I have been covering this company’s American push since it started South Carolina production to dodge tariffs, and the irony is hard to miss: Polestar did everything Washington says it wants an automaker to do, and got shown the door regardless.

Polestar will sell through its remaining US inventory of the Polestar 3 and the smaller Polestar 4, and existing owners keep full access to service and warranty support. No new 2027 vehicles will reach American showrooms. The company says 94% of its first-quarter 2026 retail sales already came from outside the US, so it is framing the exit as a pivot, not a wound.

The Connected Vehicle Rule Targets Ownership, Not Assembly Location

The Connected Vehicle Rule bans vehicles with a sufficient connection to China or Russia from the US market, with software prohibitions taking effect for the 2027 model year and hardware restrictions following in 2030. Finalized in January 2025 during the final days of the Biden administration, it covers telematics, cameras, microphones, GPS, Bluetooth, cellular modems, and automated driving software across gas, hybrid, and electric vehicles.

Polestar’s problem is its cap table. The brand is majority-owned by Geely, the Chinese group that also controls Volvo Cars and Lotus. That upstream ownership is what triggers the rule. Where the cars roll off the line does not enter into it. The Polestar 4 comes from a Renault-owned plant in Busan, South Korea; the Polestar 3 comes from South Carolina. Neither is made in China, and neither fact mattered to the outcome.

The rule traces back to a 2024 warning from regulators that Chinese-connected vehicles could harvest data on American drivers and roads. The concern centers on the modems and sensors that modern cars use to talk to the outside world. A connected car is a rolling collection of cameras and location data, and the government’s position is that it does not want that pipe owned by a company answerable to Beijing.

Volvo Got A Waiver In May, Polestar Did Not

The sharpest detail in this story is that Volvo, owned by the same Geely parent, was granted authorization to keep selling connected vehicles in the US at the end of May. Same ultimate owner, opposite result. One Geely brand stays, the other goes.

The likely reason is corporate structure. Volvo is a separately listed, larger, more established automaker with a deeper US footprint and its own governance. It told regulators in May that its waiver followed case-by-case discussions about governance, technology, and data security. Polestar is more tightly wound into Geely’s broader structure and shares vehicle platforms and software with other Geely brands. The split shows how much discretion sits inside this rule. Assembly address does not decide who gets in. Corporate plumbing and software sourcing do.

For Polestar, the timing is brutal. The Polestar 4 only went on sale in the US this month. It now carries a hard expiration date on new sales before most Americans have seen one on the road.

Polestar Leans Into Europe From A Position Of Financial Weakness

Polestar is responding by pouring its focus into Europe, which already accounts for close to 80% of its retail volume. CEO Michael Lohscheller said the industry is entering a new phase based on regional dynamics, and confirmed plans to build the upcoming Polestar 7 compact SUV in Europe. The company will keep investing in Southeast Asia, Eastern Europe, Latin America, and Canada.

The pivot reads better in a press release than on a balance sheet. Polestar sold more than 60,000 cars in 2025 and posted record Q1 2026 deliveries of 13,126, up 7%. But gross margin swung to negative 3.2% in the first quarter, down from a positive 10.3% a year earlier, hit by pricing pressure, tariffs, and product mix. This is a company growing volume while bleeding money on each sale. As we covered in November, Polestar executed a reverse stock split to stay on the Nasdaq after a $365 million quarterly loss, and Lohscheller arrived from Nikola, which filed for bankruptcy in February 2025.

The American buyers who liked this brand are the ones who lose. Polestar carved out a real niche as a design-led alternative to Tesla. We tracked Tesla owners switching to Polestar in the UK at a steady clip, drawn by Scandinavian styling and a break from the Musk brand. American shoppers who wanted that option will not get the Polestar 5, the Polestar 6 roadster, or the next-generation Polestar 2.

EVXL’s Take

This is protectionism wearing a national-security badge, and the Volvo carve-out gives the game away. If the genuine fear were Chinese-owned companies piping American driver data to Beijing, Volvo would be banned too. It is owned by the same Geely. Instead one sibling gets a waiver after friendly chats about governance and the other gets nothing, which tells you the rule is less a clean security standard than a discretionary lever the government can pull on whichever automaker it chooses.

I want to be precise about where I land, because EVXL has been consistent that we are against unfair competition from China and from the US alike. State-subsidized Chinese EVs flooding a market on artificially low prices is a real problem worth addressing. This is not that. Polestar builds a car in South Carolina, employs Americans to do it, runs Google’s Android Automotive software, and was still walled off purely on upstream ownership. Punishing a US-built EV for its cap table while waving through its corporate twin is not fair competition. It is industrial policy applied by mood.

The part that should worry every automaker is the precedent, and it is not a new one. Over at our sister site DroneXL, we watched this exact movie play out with DJI, which the FCC dropped onto its Covered List in December on the same national-security logic, with the company arguing Commerce never ran the evidence-based review the law required and calling the result protectionism in a security costume. Drones first, cars next. The Connected Vehicle Rule just proved it can remove a Swedish-branded, partly US-built EV from the market on ownership alone, and it did so while Washington claims it wants more domestic EV production. Geely-owned brands are the obvious first target. They are not the last. Any automaker carrying Chinese capital or a Chinese tech stack anywhere in its supply chain now has to wonder whether a waiver is a right or a favor. And if Beijing decides to answer this by squeezing the US automakers that build and sell in China, American brands will discover that “regional dynamics” cut both ways. For Polestar owners reading this with a car in the driveway, the immediate news is simple: your warranty and service continue, but you are now driving an orphan brand in this market, and resale value tends to follow that reality down.

Source: Polestar.

EVXL uses automated tools to support research and source retrieval. All reporting and editorial perspectives are by Haye Kesteloo.