Polestar Says Trump Administration Blocked Its US Sales While Approving Sister Company Volvo

Polestar has told its US dealers that the Trump administration delayed its application for months before rejecting it, leaving the electric vehicle maker without a clear explanation for the denial 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 beginning with a May 29, 2025 application to the Bureau of Industry and Security (BIS), a division of the Commerce Department that controls trade in sensitive technologies. Polestar was seeking authorization to continue selling vehicles in the US under a rule that bans connected vehicles — cars with internet-linked software for navigation, entertainment, and remote control — from using software originating in China. The rule was finalized by the Biden administration in January 2025. It bars 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, 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 disparity between the two outcomes is the crux of Polestar's frustration. According to Wexler's letter, Under Secretary of Commerce for Industry and Security 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 communicated that it had all the information it required to render a decision and never entered into negotiations with Polestar over potential remedies.

Polestar had come to the table with what it characterized as substantive mitigation measures — essentially, steps to reduce the security risks the rule is designed to address. The company offered regular audits, geographic restrictions on data storage and management, and limitations on digital keys and remote access, all 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 Commerce Department regulators. The lawsuit implies that Polestar's regulatory failure was at least partly self-inflicted, a characterization the Wexler letter appears designed to rebut by documenting the company's engagement timeline and the mitigation package it put forward.

This is not a new fight. Polestar had warned as early as October 2024 that a proposed Biden-era 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 regulatory architecture here is worth understanding for what it reveals about how connected-vehicle policy is being enforced. The rule does not simply ban a brand; it targets the origin of software and hardware components within the vehicle's connected systems — the infotainment platform, the telematics unit that sends data back to the manufacturer, the over-the-air update mechanism. Polestar's argument is that its Polestar 3 and the Volvo EX90 share the same underlying hardware and software stack, making the divergent regulatory outcomes difficult to reconcile on technical grounds. If the software and ownership structure are functionally equivalent, the distinguishing factor in BIS's decision-making is not publicly documented.

That opacity is the throughline of Polestar's account. The company filed its application, received an encouraging signal from the Under Secretary himself, proposed a compliance framework, and was then denied without a negotiated process or a stated rationale beyond a generic assertion that BIS had sufficient information to decide. For automakers navigating the connected-vehicle rule, particularly those with Chinese ownership ties, the practical takeaway is that approval may depend on factors the agency has not articulated, and that corporate restructuring or technical mitigation alone may not be enough.

Polestar's US withdrawal comes against an otherwise improving commercial 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 calculus 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 stack than on how BIS chooses to apply a standard that, at least in Polestar's case, it has not explained.

The broader context here is one of precedent. We have seen this pattern before, when a new regulatory framework meets an industry still sorting out its supply chains — the early days of GDPR enforcement come to mind, where companies with superficially similar data practices received wildly different outcomes. The difference is that those companies could adjust their compliance posture and re-enter the market. Polestar, at least for the 2027 model year, does not have that option. What concerns me is the signal this sends to any automaker with Chinese ownership or supply ties: that the rules of engagement with BIS are not yet predictable enough to plan multi-year product roadmaps around, and that technical merit may not be the deciding factor.