Polestar is done selling new cars in America. Not because its vehicles are bad. Not because of tariffs. Because the U.S. government looked at who owns the company and decided that was enough.
Here’s what happened, why it matters, and what the weird Volvo twist tells you about where this is all headed.
The Rule That Killed It
The Commerce Department’s Bureau of Industry and Security (BIS) denied Polestar authorization to sell 2027 model year vehicles in the United States, citing a regulation called the Connected Vehicle Rule. The rule was finalized on January 14, 2025 — in the final days of the Biden administration — and the Trump administration has kept it fully intact.
The plain-English version of what it does: starting with the 2027 model year, it bans the sale of connected vehicles from any manufacturer that is owned by, controlled by, or subject to the direction of China or Russia. Software restrictions kick in for 2027 models. Hardware restrictions follow in 2030.
Polestar’s problem is its majority owner. The Swedish-branded EV maker is majority-owned by Geely, the Chinese automotive conglomerate run by chairman Li Shufu. Under the rule’s language, that gives Polestar a “sufficient nexus” to China — and that’s all BIS needed to pull the plug.
The government’s stated concern is data. “These transactions pose national security risks,” BIS said in its ruling, “as companies from these countries may be compelled to share data or allow remote access to connected vehicles in the United States.” Modern cars — especially EVs — collect an enormous amount of information: GPS location, driving behavior, biometric data from cameras, voice recordings. Washington’s position is that a Chinese-owned company sitting on top of all that data is a national security problem, regardless of where the car was actually assembled.
The Part That Should Make You Do a Double-Take
Here’s the detail that makes this genuinely strange: the Polestar 3 is built in the United States.
It rolls off the production line in Ridgeville, South Carolina — at the same plant that builds the Volvo EX90. It didn’t matter. Made in America wasn’t enough. The rule doesn’t care about the assembly line. It cares about the corporate ownership structure.
Meanwhile, Volvo — which is also owned by Geely — received a specific authorization waiver from the Commerce Department in May, allowing it to continue selling in the U.S. Volvo went through a case-by-case review process and convinced BIS that its governance, technology, and data security practices were sufficient. Polestar went through the same process and got denied.
That outcome is hard to square on the surface. Both brands share the same platform, the same South Carolina factory, and the same parent company. The Autopian described the situation bluntly: “Something seems weird here given the commonalities between the two marques.” No one has fully explained why Volvo passed and Polestar didn’t.
How Much Does This Actually Hurt Polestar?
Less than you might think — at least financially.
The U.S. accounted for roughly six percent of Polestar’s retail sales. In the first quarter of 2026, about 94 percent of the company’s retail sales came from outside America. The brand sold approximately 5,400 vehicles in the U.S. last year, down sharply from around 13,000 the year prior. The American market had already been shrinking, with the Polestar 3 carrying discounts of up to $22,000 just to move inventory.
The company posted record results in 2025 — more than 60,000 cars sold globally and revenue above $3 billion. CEO Michael Lohscheller’s response to the ban was to lean into it: “Europe is our largest growth engine,” he said, pointing toward expansion in Southeast Asia, Eastern Europe, Latin America, and Canada as the next chapters.
What does sting is the balance sheet. Polestar’s gross margin swung from a positive 10.3 percent in Q1 2025 to negative 3.2 percent in Q1 2026. The company is burning cash. Losing even a small market removes one more revenue stream while the brand fights to right-size its financials.
Polestar’s Nasdaq-listed stock dropped 13 percent on the news.
What Happens to Existing Owners
Polestar says it will sell through its existing stock of 2026 model year Polestar 3 and Polestar 4 vehicles. It will also maintain its U.S. service network for current owners. Since most Polestar service runs through Volvo dealerships, that infrastructure won’t disappear overnight — but it will thin out over time as new-car revenue dries up.
The harder hit is on resale value. A used car whose manufacturer has officially exited the market depreciates faster than one with an active dealer network down the street. The 2025 and 2026 Polestars already on U.S. roads just became meaningfully harder to sell secondhand.
The Bigger Picture
Polestar is the headline, but it’s not the only company paying attention to this rule.
The Connected Vehicle Rule doesn’t just target Chinese-owned brands — it targets Chinese-developed software in any connected car sold in the U.S. That scope is broad enough to affect automakers across the industry. Multiple manufacturers have reportedly spent 2026 quietly auditing and scrubbing Chinese code from their software stacks to maintain compliance. Ford is currently seeking authorization for its China-built Lincoln Nautilus SUV.
The rule represents a fundamental shift in how the U.S. government thinks about car manufacturing. For most of the last century, where a car was assembled determined its nationality. That logic no longer holds in Washington. A vehicle’s “citizenship” is now defined by its software, its connectivity systems, and — critically — who owns the company writing that code and collecting that data.
Polestar built a car in South Carolina. It still got banned.
Sources: CNN Business, Top Gear, The Autopian, Carscoops, Motor1, TheStreet, GoodCarBadCar — all reporting June 25–26, 2026.