Surprisingly Polestar Won’t Fight Leaving The U.S.

Polestar’s departure from the United States now appears all but final. The Swedish electric-vehicle company has decided not to challenge the federal government’s decision barring it from selling future models in this country, leaving its American dealers to determine what happens to their investments, remaining inventory and franchise agreements.

The Wall Street Journal reports Polestar will not ask the U.S. Department of Commerce to reconsider its decision and will not take the dispute to court. Either route could have prolonged the company’s fight to remain in the American market, but Polestar has instead chosen to concentrate its resources elsewhere. Commerce Department’s Bureau of Industry and Security denied Polestar the specific authorization it needed to continue selling new vehicles beginning with the 2027 model year. The decision was made under the federal Connected Vehicle Rule, which restricts vehicles and connected-vehicle technology linked to China or Russia because of national-security and data-privacy concerns.

The rule, issued in January 2025 and effective beginning March 17, 2025, prohibits 2027 model-year connected vehicles from being sold by manufacturers owned or controlled by China or Russia. It also applies to vehicles using certain covered software from those countries. Additional restrictions on connected-vehicle hardware are scheduled to take effect with the 2030 model year. Polestar is based in Sweden but is majority-owned by China’s Geely Holding. That ownership connection proved to be the central obstacle, even though the Polestar 3 is assembled at Volvo’s factory in South Carolina. In other words, moving final assembly to the United States was not enough to escape a rule that examines ownership, control, software and connected technology—not simply where the vehicle rolls off the assembly line.

This is especially notable because Volvo Cars, which is also controlled by Geely and helped establish Polestar, received federal authorization in May to continue selling vehicles in the United States, provided it complies with the rule’s requirements. The Commerce Department has not publicly explained why Volvo’s application succeeded while Polestar’s did not. Polestar will continue selling its remaining 2026-model inventory, including available Polestar 3 and Polestar 4 vehicles. The company has also said existing owners will retain access to service, parts and other after-sales support through its network. Used Polestar vehicles can continue to be sold, since the federal action applies to the sale of new vehicles beginning with the 2027 model year. Questions involve Polestar’s 32 American retail locations. Dealers invested in facilities, personnel, equipment and training with the expectation that the brand would remain in the United States and expand its product lineup. Some were preparing for additional models when the federal decision abruptly changed those plans.

Polestar maintains that it is not formally terminating its dealerships and says it will continue working with retailers during the transition. That wording may not settle the legal and financial issues, however. According to The Wall Street Journal, state franchise laws may require an automaker leaving a market to repurchase unsold inventory, reimburse certain investments or compensate dealers for the fair market value of their franchises. The exact obligation will depend on the laws of each state and the language of individual dealer agreements. American business was not a major contributor to Polestar’s worldwide volume. The United States represented only 6% of the company’s first-quarter sales, while Europe accounted for 78%. Europe’s share grew to approximately 80% during the first half of the year. Polestar CEO Michael Lohscheller also acknowledged to Reuters that the American operation was not profitable and required a level of investment the company will no longer have to make. Polestar will now place greater emphasis on Europe, including expanding its retail presence and eventually manufacturing the upcoming Polestar 7 there.

For Polestar, accepting the federal decision may be the least expensive strategic choice. For its American dealers, however, this is not simply a matter of redirecting a few cars to Europe. They are left with buildings, employees, customers and substantial investments tied to a brand that has decided the legal fight is not worth fighting.