BY COMFORT OGBONNA
Electric vehicle manufacturer Polestar announced that it will stop selling new vehicles in the United States beginning with the 2027 model year after failing to secure authorization under new federal regulations governing connected vehicle technology. The decision marks a significant setback for the Swedish automaker and highlights the growing impact of U.S. efforts to restrict vehicles with technology linked to China.
The announcement sent Polestar’s shares down more than 6% during Thursday trading on the Nasdaq as investors assessed the long-term impact of losing access to one of the world’s largest automotive markets.
The company said the U.S. Commerce Department denied its request for authorization under the Connected Vehicles Rule, a regulation designed to address national security concerns surrounding internet-connected vehicle systems. The rule restricts the import and sale of vehicles equipped with connected technologies that have ties to China, beginning with the 2027 model year.
The regulation covers a wide range of modern vehicle technologies, including Bluetooth, Wi-Fi, cellular connectivity, and certain satellite communication systems. U.S. officials have argued that these technologies could potentially be used to collect sensitive information about American drivers or create cybersecurity vulnerabilities, prompting stricter oversight of vehicles with Chinese-linked technology.
Originally adopted during the administration of former President Joe Biden in January 2025, the rule has remained in effect under President Donald Trump as Washington continues to strengthen restrictions on Chinese technology and imports across multiple industries.
The decision represents another major step in the United States’ broader effort to reduce dependence on Chinese automotive manufacturing while encouraging domestic vehicle production. In addition to connected vehicle restrictions, Chinese-made electric vehicles already face substantial tariffs, and lawmakers are considering further measures that could tighten market access even more.
Although Polestar will no longer be able to introduce new vehicles into the U.S. market beginning with the 2027 model year, the company emphasized that it remains committed to supporting its existing customers. Sales of current inventory for the Polestar 3 and Polestar 4 will continue while supplies last, and owners will retain access to the company’s service and maintenance network. Polestar also confirmed that it will not appeal the Commerce Department’s decision.
The company had previously warned investors that the connected vehicle regulations could effectively block its operations in the United States, even for vehicles assembled within the country. Those concerns have now become reality, forcing the automaker to accelerate its strategic shift toward Europe.
Chief Executive Officer Michael Lohscheller said the global automotive industry is increasingly being shaped by regional policies and geopolitical considerations. He noted that Europe has become Polestar’s largest growth market and will play a central role in the company’s future expansion strategy.
As part of that strategy, Polestar plans to manufacture its upcoming Polestar 7 compact SUV in Europe, reinforcing its commitment to the region as governments continue to support electric vehicle adoption through favorable regulations and expanding charging infrastructure.
The company’s sales figures already reflect this geographic shift. During the first quarter, only 6% of Polestar’s global vehicle sales came from the United States, while Europe accounted for approximately 78% of total deliveries. Slower consumer spending, rising competition from established automakers and emerging EV brands, and evolving trade policies have made the U.S. market increasingly difficult for the company.
Polestar has also faced persistent financial challenges in recent years. Despite expanding its product lineup, the automaker has struggled to achieve consistent profitability and has relied on repeated financial support from its majority owner, China’s Geely Holding, and company chairman Li Shufu. Weak share performance also forced Polestar to conduct a reverse stock split last year to maintain its listing on the Nasdaq stock exchange.
The latest regulatory decision also raises uncertainty about the future of the Polestar 3, currently the company’s only vehicle manufactured in the United States. Earlier this year, Volvo Cars announced plans to consolidate production of the Polestar 3 at its manufacturing facility in South Carolina rather than continuing production in Chengdu, China.
However, Volvo confirmed that manufacturing in China has not yet been discontinued and said it is still evaluating whether the latest U.S. government decision will require adjustments to its production strategy.
The tougher regulatory environment has already influenced Polestar’s product roadmap. Instead of introducing several entirely new models, the company has focused on updating and refreshing existing vehicles while managing rising production costs and the impact of international tariffs.
Later this year, Polestar expects to begin deliveries of a new version of the Polestar 4, followed by an updated edition of the Polestar 2 sedan in 2027. Looking further ahead, the company’s next all-new model, the Polestar 7 compact electric SUV, is scheduled to enter production at Volvo’s planned manufacturing facility in Slovakia.
As geopolitical tensions continue to reshape global supply chains and trade policies, automakers with international ownership structures are facing increasing regulatory scrutiny. For Polestar, the inability to secure U.S. authorization underscores the growing challenges confronting global electric vehicle manufacturers as governments place greater emphasis on national security, domestic production, and technological independence.
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