US Connected Vehicle Rule Forces Polestar Out of American Market from 2027, Exposing Broader Tech Decoupling in Autos

The U.S. Department of Commerce's Bureau of Industry and Security has denied Polestar authorization to sell vehicles in the United States from model year 2027 onward under the Connected Vehicle Rule, citing national security concerns tied to the company's majority ownership by Chinese automaker Geely. Polestar confirmed the decision in a statement, noting it will shift strategic focus to Europe, where the majority of its growth is centered. In Q1 2026, 94% of its 13,126 retail sales came from ex-U.S. markets.[1][2]

The rule, finalized in January 2025 and effective March 2025, prohibits the import or sale of connected vehicles with a 'sufficient nexus' to China or Russia. It targets manufacturers owned, controlled by, or subject to the jurisdiction of those countries, along with covered software (effective MY 2027) and hardware (MY 2030). BIS describes modern vehicles as potential 'mobile data centers' vulnerable to data exfiltration or remote access by foreign adversaries.[3][4]

Notably, Geely-owned Volvo Cars received specific authorizations in May 2026 allowing continued U.S. sales, avoiding a similar ban. Analysts note potential shared manufacturing impacts, as Polestar and Volvo use overlapping facilities, including the Polestar 3 assembly at Volvo's Charleston, South Carolina plant. Despite U.S. production, Polestar's Chinese ownership nexus triggers the restriction.[2]

This case illustrates a deepening U.S.-China tech decoupling in the automotive sector beyond tariffs, extending to software, connectivity, and supply chains. Polestar plans to redirect South Korea-built vehicles to Europe to sidestep related tariffs, while continuing to support existing U.S. inventory and customers. The episode underscores lasting consequences for global EV strategies amid regional regulatory fragmentation.[5]