The US is uniquely strict in its stymieing of Chinese-made or owned automotive brands. By Stewart Burnett
The US Department of Commerce has denied Polestar authorisation to sell vehicles in the US from model year 2027 onwards, citing the Biden-era Connected Vehicle Rule which bars the import and sale of vehicles with software from China and Russia. Polestar, majority-owned by China’s Geely, will continue to sell existing Polestar 3 and Polestar 4 stock and honour all existing warranties and service commitments, but will not market or sell new model year 2027 vehicles in the country.
Shares fell 6.3% on the news breaking, but the decision itself was not a surprise. Polestar had warned as early as 2024 that the rule would effectively lock it out of the US market, and the company did not make any effort to appeal the decision. The US is not a core market for the electric vehicle (EV) maker, accounting for just 6% of Q1 2026 sales against Europe’s 78%, meaning the commercial impact is limited.
Still, the dent to its reputation and the precedent the decision sets for other Geely brands could be quite substantial. Thus far Geely brands have fared unevenly against the rules: Volvo Cars received a separate authorisation in May 2026 that effectively allows it to continue its US sales. Still, it must demonstrate compliance with the rule’s specifications across its lineup. Lotus, which produces the Eletre SUV and Emeya GT in China, has not yet received a ruling and remains in an uncertain position. Ford is separately pursuing authorisation for the China-built Lincoln Nautilus, illustrating that the rule’s reach extends beyond purely Chinese-owned brands into any vehicle with software that is exposed to China’s automotive supply chain.
Polestar’s response is, essentially, to accelerate its European expansion. Reuters quotes Chief Executive Michael Lohscheller describing Europe as the company’s “largest growth engine” and confirmed the Polestar 7 compact SUV will be built at Volvo’s planned factory in Slovakia. Having a European production base does more than circumvent the EU’s tariff regime on Chinese-made EVs—it could help insulate Polestar from the US’ connected vehicle rules and EU import tariffs on Chinese-made vehicle.
Canada has also been explicitly named as a continued growth market alongside Southeast Asia, Eastern Europe and Latin America; Polestar reintroduced the 2027 Polestar 2 to the Canadian market this month, using it as a North American toehold that the US ban cannot reach. Mexico’s restrictive measures against non-FTA partners, introduced in January, make it a harder entry point, but Canada’s quota-based access regime—49,000 units annually, across all automakers, at 6.1% tariff — remains viable.
The Polestar ban is a preview of a structural reclassification that the US government is conducting across the entire connected vehicle space. The rule does not distinguish between a Chinese automaker and a Swedish one with Chinese ownership; what it targets is software provenance and data governance. That logic, applied consistently, will eventually reach every vehicle with significant Chinese software or component content—including models from legacy brands that have not yet received a ruling and may not be braced for one.
The ban lands as Polestar is already in a fragile financial position. The company has required repeated capital injections from Geely and its Chairman, Li Shufu; its shares have declined sharply enough to require a reverse stock split to maintain its Nasdaq listing; and it has been refreshing ageing models rather than launching new ones under tariff pressure, with no entirely new model until the Polestar 7.
Record sales in 2025 and Q1 2026 do provide a valid basis for optimism about the automaker’s prospects in Europe. Still, those results were achieved before the US exit was confirmed—a market whose contribution, however insubstantial at present, was still part of the brand’s growth calculus. The Slovakian-made Polestar 7, insulated from both rule sets, could in the long term prove to be the company’s most important single product decision.
The Polestar decision is also the clearest signal yet of how the Connected Vehicle Rule will be applied in practice. Other automakers now scrambling for authorisation, including those with far larger US exposures than Polestar’s 6%, are now watching to understand whether Geely’s ownership structure was specifically disqualifying or whether the rule’s software and data provisions can be satisfied by architectural changes to how vehicles communicate.