Polestar Exits US Market as China Connected-Car Ban Bites

Polestar, part of the Chinese-owned electric car brand that spun out of Volvo, will leave the United States after the Commerce Department denied permission to continue selling new cars, making the company the first casualty of a major U.S. crackdown on Chinese auto technology.

The decision is the opening of a law designed to strip software written in Chinese from any new car that connects to the Internet, which Washington frames as closing the door on cameras, microphones and GPS systems it fears could be turned into surveillance tools by a hostile country. For small and medium-sized British suppliers watching the trade winds, it is a direct reminder that the ownership and the code, not just when the car is put together, now determines the market access.

Polestar, which is controlled by Chinese auto giant Zhejiang Geely Holding Group, had applied to continue selling under a statutory waiver process. The government refused, the company confirmed on Thursday. The Commerce Department did not immediately comment.

The brand said it will continue to sell its remaining US stock and will honor the service and maintenance of the existing network, leaving current owners covered as the caps come down on new sales.

Enacted under the previous administration, the “connected car” law restricts the import or sale of vehicles whose hardware and software are tied to China, for national security reasons. The final rule went into effect in March 2025 and has been extended beyond the current White House’s appointment.

Automakers have been given until March of this year to confirm to the US government that their products are not coded in China or by a Chinese company, or request permission to continue sales from the 2027 model year onwards. It is a high bar, and one that bites the parent company as in the asset book.

That difference explains the awkward split within the Geely empire. Volvo, which is also majority-owned by a Chinese group, received approval in May to continue trading in the US, after what it described as a case-by-case review and discussions with officials about its technology and data security. Polestar, working on a similar process, did not remove it.

The rejection is the latest step in a broader U.S. push for a wall of Chinese-owned cars. Lawmakers have spent recent weeks floating regulations that would go forward, barring Chinese manufacturers from building cars on American soil.

Polestar sounded confident it would keep up. Chief executive Michael Lohscheller said in a recent interview that the company was “negotiating well with the authorities” about the release, adding: “The US is important because it’s obviously a big market.”

Established as Volvo’s arm and motorsport arm, Polestar became an independent brand in 2017 and was named as a separate company in 2021, navigating with a special-purpose car in the high-pitched area of ​​electric car noise, where traditional carmakers and upstarts are trying to share the price tag.

It was introduced in a limited edition Polestar 1, a hybrid coupe priced at $156,000, and the Polestar 2, an electric sports saloon made in China that took the lead from the original Tesla Model 3. But the thin line left it exposed, especially in the US, where buyers are more dependent on SUV trucks. Shares are now changing hands at $19.22, down 96 percent from a high of $459.90 in November 2021.

Its Chinese ties had proved too expensive. Punitive tariffs imposed by both the Biden and Trump administrations have pushed the Chinese-made Polestar 2 out of the U.S. range. Today the brand sells the Polestar 3 SUV, made at Volvo’s plant in South Carolina, and the Polestar 4 SUV, shipped from South Korea, neither of which is made in China.

Polestar said it will now focus on developing its European business, which already accounts for around 80 percent of global sales. The pivot comes at a time when the politics of Chinese-made electric cars is rife on both sides of the Atlantic, with the EU pushing ahead with Chinese electric car deals despite resistance from Germany.

Britain, on the other hand, is treading a very different path, courting rather than chasing Chinese capital. Nissan’s recent deal to build Chery cars in Sunderland underlines how far the UK’s figures differ from those in Washington, as ministers face pressure to rethink their 2030 timetable for phasing out petrol cars.

For Lohscheller, the lesson is that the global car market is fragmented geographically. “The automotive industry is entering a new phase, based on the strength of the region,” he said on Wednesday. For Polestar, that new phase begins with continental ambition and a closed door on the world’s most important automotive market.