Why Is the US Letting Volvo Sell Cars But Blocking Polestar?

Polestar, an electric car company, has told its US dealers that the Trump administration delayed its application for months before rejecting it, leaving the company without a clear explanation for why it was denied while its sister company Volvo received approval under what Polestar describes as an effectively identical ownership structure. The disclosure came in an August 18 letter to dealers obtained by The Verge. The Verge

The letter, written by Polestar's head of product Peter Wexler, lays out a timeline that starts with a May 29, 2025 application to a government office called the Bureau of Industry and Security, or BIS, which sits inside the Commerce Department. Polestar was asking for permission to keep selling cars in the US under a rule that bans vehicles with software from China. Modern cars are essentially computers on wheels — they connect to the internet, share data with the manufacturer, and can be updated remotely. The US government worries that Chinese software in those systems could be used for spying or sabotage. The rule was finalized under the Biden administration in January 2025. It prohibits Chinese connectivity software starting with the 2027 model year and Chinese hardware from model year 2030. Reuters

Polestar and Volvo share the same majority Chinese owner, a company called Geely. In May 2026, the Commerce Department approved Volvo to continue importing and selling vehicles in the US despite that ownership tie. Roughly one month later, BIS rejected Polestar's similar request. Polestar subsequently announced it would stop selling vehicles in the US starting with the 2027 model year, a decision that, per The Verge, shocked the auto industry. The Verge

The gap between the two outcomes is the heart of Polestar's frustration. According to Wexler's letter, a senior Commerce Department official named Jeffrey Kessler told Polestar representatives in an in-person meeting that it would be reasonable for Polestar to expect approval if Volvo was approved under "effectively the same shareholding and ownership structure and with the same hardware and software in the Polestar 3 as the Volvo EX90." Despite that assurance, BIS ultimately denied the application without engaging in substantive discussion. The agency said it had all the information it needed to make a decision and never entered into negotiations with Polestar over possible fixes.

Polestar had come to the table with what it described as substantive steps to address the government's concerns. The company offered regular audits, restrictions on where data is stored and managed, and limits on digital keys and remote access to the cars. All of these were designed to satisfy the connected-software ban's requirements. The administration declined every proposed measure. Polestar says it still does not have a clear answer as to why its application was denied given Volvo's approval under comparable conditions.

The fallout is now playing out in court. Prestige Imports, a New Jersey Polestar dealer, has sued the company, accusing it of engineering its own exit from the US by failing to do enough to satisfy government regulators. The lawsuit implies that Polestar's regulatory failure was at least partly self-inflicted. The Wexler letter appears designed to push back against that claim by documenting the company's engagement timeline and the fixes it put forward.

This is not a new fight. Polestar had warned as early as October 2024 that a proposed rule to bar Chinese vehicle hardware and software would "effectively prohibit" the sale of its cars in the US. Reuters When the rule was finalized in January 2025, it confirmed those fears. The same month, Polestar announced the Polestar 7 compact SUV amid flagging sales and said it no longer expected to match its 2023 revenue in 2024. The Verge

The rule does not simply ban a brand by name. It targets where the software and hardware components inside a car's connected systems come from. Polestar's argument is that its Polestar 3 and the Volvo EX90 share the same underlying technology, making the different regulatory outcomes hard to explain on technical grounds. If the software and ownership structure are functionally the same, the factor that led BIS to treat them differently is not publicly known.

That lack of transparency is the running theme of Polestar's account. The company filed its application, received an encouraging signal from a senior official, proposed a set of compliance measures, and was then denied without a negotiated process or a stated reason beyond a generic assertion that BIS had enough information to decide. For any automaker with Chinese ownership ties, the practical message is that approval may depend on factors the agency has not explained, and that offering technical fixes may not be enough.

Polestar's US withdrawal comes against an otherwise improving business picture. The company reported estimated sales of 30,423 vehicles in the first half of 2026, including 17,296 in the second quarter, both record figures. Polestar Media It has also confirmed a new model based on the Polestar 4, available to order from September 2. None of that momentum, however, will translate into US market presence for the 2027 model year and beyond, unless the regulatory situation changes. The company's broader product and research ambitions, including a pilot study with the University of Oxford's SDG Impact Lab to scientifically define and measure the sensation of driving, continue elsewhere.

The connected-vehicle rule has now claimed its first major automaker casualty in the US market. Whether it claims others may depend less on the technical details of any given vehicle's software than on how BIS chooses to apply a standard that, at least in Polestar's case, it has not explained.

In my view, what makes this story significant is not just that an EV brand is leaving the US market. It is that two companies with the same parent, the same underlying technology, and the same regulatory filing produced opposite outcomes — and the agency responsible has not said why. Having watched technology regulation unfold over three decades, from the early internet to the current AI wave, I have learned that rules work best when companies can understand what is expected of them. When the standard is opaque, the result is not just unfair treatment of individual firms. It is a chilling effect on investment and planning across an entire industry, as companies cannot know whether their efforts to comply will be enough until the answer arrives — and by then, the product cycle has moved on.