Polestar banned from US market under rule targeting China-linked connected vehicles

Polestar said on Thursday that the Trump administration is forcing the electric vehicle maker to stop selling vehicles in the U.S. starting with the 2027 model year under a new regulation cracking down on China-linked automakers.

The Commerce Department's Bureau of Industry and Security (BIS) declined to grant Polestar authorization to sell cars under the Connected Vehicles Rules, which restricts the importation and sale of cars with connected vehicle technology linked to China starting with the upcoming model year.

Bluetooth, wireless internet, cellular connectivity and some satellite communications technologies are covered under the rules based on national security concerns stemming from the ability of such vehicles to collect sensitive data on American owners.

The Commerce Department first adopted the rule in January 2025 before the end of the Biden administration, while it has remained in effect under President Donald Trump.

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Polestar CEO Michael Lohscheller said in a statement that the company will place a greater emphasis on Europe in its corporate strategy going forward, while the automaker's announcement noted that 94% of its retail sales volumes in the first quarter of 2026 was from markets outside the U.S.

Lohscheller said that the "automotive industry is entering a new phase, based on regional dynamics. Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe."

"Our record sales in 2025 and the first quarter of 2026 show that we are making strong progress, with several new market launches taking place in Europe this year. In addition, we will continue to invest in markets where we have opportunities to continue to grow, like Southeast Asia, Eastern Europe, Latin America and Canada," he added.

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Polestar, which is based in Sweden, is majority owned by China's Geely Holding Co.

FOX Business reached out to the Commerce Department and Geely for comment.

The company has struggled to turn a profit and has required repeated capital injections from Geely, and its shares have fallen sharply, which prompted it to carry out a reverse stock split last year to remain listed on the Nasdaq exchange.

Following the Commerce Department's decision, Polestar will continue to sell the existing stock of Polestar 3 and Polestar 4 vehicles in the U.S. and support customers through access to its service network.

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Volvo, which produces some of Polestar's cars and is a sister brand to the automaker, said in March it would consolidate production of the Polestar 3 at its South Carolina plant instead of also building it in China. It said it was too early to say whether Thursday's announcement would shift those plans.

The Polestar 3 is the company's only U.S.-manufactured model.

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Reuters contributed to this report.