Electric vehicle manufacturer Polestar said Thursday it will be forced to stop selling vehicles in the United States beginning with the 2027 model year after the Trump administration declined to grant the company authorization under federal connected-vehicle regulations aimed at limiting Chinese technology in automobiles.
The announcement marks a significant setback for the Sweden-based automaker, which is majority-owned by Chinese automotive group Geely Holding and has been attempting to expand its presence in the U.S. electric vehicle market. Shares of the company fell 5.7% in early trading following the disclosure.
The decision stems from the U.S. Connected Vehicles Rule, which restricts the import and sale of vehicles containing connected technologies linked to China beginning with the 2027 model year. The regulation covers technologies such as Bluetooth, Wi-Fi, cellular connectivity and certain satellite communications systems, which U.S. officials argue could pose national security risks because of their ability to collect and transmit sensitive data about vehicle owners.
The rule was finalized in January 2025 during the administration of former President Joe Biden and has remained in force under President Donald Trump as Washington continues efforts to reduce reliance on Chinese technology and strengthen domestic manufacturing.
Polestar said it was not granted the authorization necessary to continue selling future model-year vehicles in the United States. However, the company emphasized that it will continue supporting existing customers and selling currently approved vehicles, including the Polestar 3 and Polestar 4, while maintaining access to its service network.
The U.S. Department of Commerce did not immediately respond to requests for comment on the decision.
The automaker had warned investors as early as 2024 that the connected-vehicle regulations could effectively prevent it from operating in the U.S. market because of its ownership structure and technology supply chain. Even vehicles manufactured domestically could be affected if they contain components or software falling under the restrictions.
“The automotive industry is entering a new phase, based on regional dynamics,” Chief Executive Officer Michael Lohscheller 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 move highlights the increasingly difficult environment facing Chinese-linked automakers in the United States. In addition to connected-vehicle restrictions, imports of Chinese-made electric vehicles are already subject to steep tariffs, while lawmakers continue to push for broader measures designed to curb Chinese influence in the automotive sector.
Polestar has already been shifting its focus toward Europe as competition intensifies in the U.S. market and consumer demand for electric vehicles grows more slowly than many industry forecasts anticipated. The company reported that only 6% of its first-quarter deliveries came from the United States, while Europe accounted for 78% of total sales.
The company has struggled financially in recent years and has relied on repeated capital injections from Geely and its chairman, Li Shufu. Its stock price has fallen sharply since going public, forcing the company to conduct a reverse stock split last year to maintain compliance with Nasdaq listing requirements.
The decision also raises uncertainty about the future of the Polestar 3, currently the company’s only model manufactured in the United States. Production takes place at a factory in South Carolina operated by sister company Volvo Cars, which announced earlier this year that it intended to consolidate Polestar 3 production there rather than continue parallel manufacturing in China.
A Volvo spokesperson said Thursday that production in Chengdu has not yet been halted and that it was too early to determine whether the latest U.S. decision would alter the company’s manufacturing strategy.
The development comes as automakers across the industry seek regulatory approval to continue selling vehicles that contain connected technologies affected by the federal rules. Volvo said in May that it had secured authorization to continue operating under the framework, although it must still ensure compliance across its U.S. lineup.
Facing mounting tariff and regulatory pressures, Polestar has increasingly focused on updating existing vehicles rather than introducing entirely new models. The company expects deliveries of a new Polestar 4 variant later this year, followed by an updated version of the Polestar 2 sedan in 2027.
Its next all-new vehicle, the Polestar 7 compact SUV, is scheduled to be produced at Volvo’s planned manufacturing facility in Slovakia, underscoring the company’s growing emphasis on Europe as its primary market for future growth.
For Washington, the decision represents another step in a broader campaign to restrict Chinese involvement in strategically sensitive sectors. For Polestar, it effectively closes the door on future U.S. vehicle sales unless regulatory conditions change, leaving the automaker increasingly dependent on European and other international markets for its long-term expansion plans.
