Key facts
- Polestar will exit the U.S. market from model year 2027.
- The U.S. Commerce Department denied Polestar an exemption to the Connected Vehicle Rule.
- The rule targets vehicles with Chinese-linked software or hardware.
- Polestar's U.S. and South Korean assembly locations did not grant an exemption.
- Volvo, also linked to Geely, received an exemption.
- Polestar will continue after-sales support for existing owners.
Electric vehicle maker Polestar will cease sales in the United States from model year 2027, following the U.S. Commerce Department's denial of its request for an exemption to the Connected Vehicle Rule. This regulation targets vehicles with software or hardware that has a significant connection to China or Russia, citing national security concerns related to data collection.
The rule, finalized in January 2025 and effective since March 17, 2025, prohibits the sale of connected vehicles with Chinese or Russian links. This ban applies to telematics systems, cameras, microphones, GPS, Bluetooth, cellular modules, and automated driving software, irrespective of the vehicle's powertrain or where it is assembled. Polestar's U.S. assembly plant in Ridgeville, South Carolina, where it invested $1.3 billion, and its Polestar 4 assembly in Busan, South Korea, were not sufficient to bypass the restrictions.
The decision highlights the increasing use of technology trade controls in the broader economic contest between the U.S. and China. While Polestar, majority-owned by China's Geely Holding Group, was denied authorization, Volvo, which also has ties to Geely, received an exemption. This suggests regulators are making granular assessments based on specific software and hardware supply chains rather than just brand ownership or final assembly location.
Polestar had previously warned its U.S. dealers of this potential outcome as early as 2024. The company announced it will halt U.S. sales once its current inventory is depleted and cancel the planned U.S. launch of two new models. However, Polestar will continue to provide after-sales support for existing owners. CEO Michael Lohscheller indicated that the company will shift its strategic focus towards Europe, which he described as its largest growth engine, and other markets such as Southeast Asia, Eastern Europe, Latin America, and Canada.