Why is Polestar leaving the US? Trump's EV technology rule has the answer

Polestar said it will exit the US market for new vehicle sales starting with its 2027 model year cars after the Trump administration declined to grant the company permission to continue selling under the connected vehicle rules.

The decision effectively shuts Polestar out of the American market for future sales and sent the company’s shares down 5.7% in early trading.

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A firewall drawn across the road ahead

The rule at the centre of the dispute bars the import and sale of vehicles using connected-car technology linked to China from the 2027 model year onwards.

The technologies covered include Bluetooth, Wi-Fi, cellular connectivity and some satellite communication systems. US officials have argued that such systems could allow vehicles to gather sensitive information about American drivers, raising national security concerns.

The rule was originally adopted in January 2025 under former president Joe Biden, and the Trump administration has chosen to keep it in force and begin enforcement.

A Swedish badge under an eastern shadow

Polestar is a Swedish brand, but it is majority-owned by Chinese automaker Geely, which placed it under additional scrutiny as Washington intensified restrictions on Chinese-linked vehicle technology.

The company had warned as early as 2024 that the Connected Vehicles Rule could make sales in the US unworkable, including for cars assembled in the country. Despite the exit from new sales, Polestar said it will continue selling existing Polestar 3 and Polestar 4 inventory in the US and will keep its service and support network available for customers.

A continental pivot gathers pace

The development comes as Polestar continues to shift its business away from the US and deeper into Europe, where it sees stronger demand.

Only 6% of Polestar’s total sales in the first quarter came from the US, while 78% came from Europe. Chief executive Michael Lohscheller said the global auto industry is becoming more regional and that Europe is now the company’s biggest growth market.

Polestar also said it plans to build its future Polestar 7 model in Europe, while the next generation of the Polestar 4 is expected later this year, and an updated Polestar 2 sedan is planned for 2027.

The assembly line awaits its next chapter

The US decision also adds uncertainty around Polestar 3 production, which is currently the company’s only model manufactured in the United States.

Volvo, Polestar’s sister company, received authorisation from US regulators in May, although it still needs to ensure that vehicles sold in America comply with the rule. Volvo had earlier said it intended to concentrate Polestar 3 production at its South Carolina plant, while stopping output in Chengdu.

On Thursday, a Volvo spokesperson told Reuters that production in China had not yet stopped, and the company said it was still too early to know whether the latest US ruling would change its production plans.

With the new restriction, Polestar will effectively withdraw from the US market for new vehicle sales from the 2027 model year onwards.

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FAQs

Q1: Why is Polestar exiting the US market?

Ans: Polestar is exiting new US vehicle sales from the 2027 model year after the Trump administration enforced rules restricting China-linked connected vehicle technology.

Q2: Will Polestar continue to support existing customers in the US?

Ans: Yes, Polestar said it will continue selling existing inventory and provide service and support for customers in the United States.