Swedish automaker Polestar announced in late June that it would be barred from selling its vehicles in the U.S. starting in 2027 under a federal regulation targeting internet-connected vehicles with technology linked to China. The company now alleges that the Department of Commerce initially indicated that its request would be approved, only to later deny it.
The U.S. government introduced the security policy to prevent foreign governments, particularly China and Russia, from potentially collecting data from or remotely accessing connected vehicles on American roads. Polestar is majority-owned by Zhejiang Geely Holding Group, a major Chinese automotive holding company, leading federal officials to determine that its software, hardware, and corporate structure posed an unresolved national security risk. However, Volvo, which is also majority-owned by Geely, received approval to continue selling its vehicles in the U.S.
Polestar told its dealers in a letter dated August 19 that it did not receive an explanation as to why it was banned from the U.S. Company officials claimed that the Department of Commerce had hinted in January that Polestar would be allowed to sell vehicles in the country. However, it was eventually denied approval, forcing it to wind down its U.S. sales operations, while Volvo was allowed to continue selling its cars. The contents of the letter were reported by The Wall Street Journal.
Peter Wexler, Polestar’s U.S. head of product, retail network, and government affairs, stated in the letter to dealers: “In essence, we are currently focusing on getting the attention of (the Commerce Department) to obtain the requested information and to understand the underlying basis for the denial.”
The letter further stated that the Swedish brand had to answer multiple rounds of questions last year, and Commerce Department officials said the responses were satisfactory. The agency conducted a 13-month review of the automaker, assessing its data practices, and even extended the review deadline four times.
Wexler added that Commerce’s Under Secretary for Industry and Security, Jeffrey Kessler, had told Polestar management that approval could be expected if Volvo was approved. However, that was not the case. To add to its troubles, dealers are now taking legal action against Polestar over the automaker’s impending U.S. exit. A New Jersey dealership has filed a lawsuit seeking at least $25 million, alleging that Polestar violated the state’s Franchise Practices Act and left retailers facing significant losses.
Polestar has decided not to appeal the Commerce Department’s denial, which prevents it from selling new vehicles in the U.S. from the 2027 model year onward. However, the automaker has challenged the treatment it received, telling Commerce Department officials that the decision was disparate and “contrary to law,” according to The WSJ. Despite this, Polestar has said it will not appeal the denial and will instead shift its focus toward European markets while continuing to support existing U.S. customers.
