The denial is a concrete escalation in the use of technology trade controls as a tool in the broader US-China economic contest, and it carries implications beyond the automotive sector. Geely’s split outcome, with Volvo granted an exemption and Polestar denied, signals that US regulators are making granular determinations based on software and hardware supply chains rather than brand ownership or final assembly location. That distinction matters for any company with Chinese-linked components anywhere in its technology stack, not just EV manufacturers.
For investors in Geely, the ruling removes a meaningful growth market for one of its key brands and raises questions about how far the connected vehicle framework will extend as the model year 2030 hardware restrictions approach. The broader read for US-China relations is that technology decoupling is now reaching consumer products, and the exemption-versus-denial dynamic gives Washington a granular lever to reward or penalise individual companies without formal tariff action.
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US Commerce has denied Polestar authorisation to sell in the United States from model year 2027 under rules targeting Chinese-linked vehicle software and hardware.
Summary:
- The US Department of Commerce’s Bureau of Industry and Security denied Polestar authorisation under the Connected Vehicle Rule, barring the brand from selling vehicles in the United States from model year 2027 onwards
- The Connected Vehicle Rule, finalised in January 2025 and effective from March 17 2025, bans connected vehicles with a sufficient nexus to China or Russia, with software prohibitions applying from model year 2027 and hardware restrictions from model year 2030
- The rule covers telematics, cameras, microphones, GPS, Bluetooth, cellular modules and automated driving software across all vehicle types, and applies to American-built models that use Chinese software, meaning factory location alone does not secure authorisation
- Polestar’s Polestar 3 is assembled at Volvo’s plant in Ridgeville, South Carolina, following a $1.3 billion investment intended to reduce tariff exposure; the Polestar 4 is built in Busan, South Korea; neither location was sufficient to secure approval
- Geely, which holds stakes in both Polestar and Volvo, saw a divergent outcome: Volvo was granted an exemption by the US government approximately one month before the Polestar denial was confirmed
- Polestar had warned its US dealers of the likely outcome as early as 2024, and the Commerce Department’s decision confirmed those warnings
The US Department of Commerce has barred Polestar from selling vehicles in the United States from model year 2027, dealing a significant blow to the Geely-owned electric vehicle brand and underlining how deeply technology trade controls are now cutting into consumer markets as Washington and Beijing’s economic contest intensifies.
The decision, made by the Commerce Department’s Bureau of Industry and Security, denied Polestar authorisation under the Connected Vehicle Rule, a regulation finalised in January 2025 that targets vehicles with software or hardware carrying a sufficient nexus to China or Russia. The rule, which took effect in March 2025, applies to telematics systems, cameras, microphones, GPS units, Bluetooth and cellular modules, and automated driving software, and covers all vehicle types regardless of powertrain. Crucially, it also applies to vehicles assembled in the United States if their underlying technology retains Chinese links, a provision that made Polestar’s South Carolina factory irrelevant to the outcome.
Polestar had invested $1.3 billion in its Ridgeville, South Carolina plant, partly in an effort to manage tariff exposure. The Polestar 3 is built there, on the same production line as Volvo models, while the Polestar 4 is assembled in Busan, South Korea. Neither arrangement was sufficient. The company had warned its US dealer network of the likely outcome as early as 2024.
The contrast with Volvo is striking. Geely holds stakes in both brands, yet Volvo received a government exemption approximately one month before the Polestar denial was confirmed. That split verdict signals that US regulators are conducting granular, company-by-company assessments of technology supply chains rather than applying blanket decisions based on corporate ownership structures, giving Washington a precise and flexible instrument for managing the technology dimension of the US-China relationship without resort to formal tariff measures.
Hardware restrictions under the same rule are scheduled to extend further, applying to vehicle connectivity system components from model year 2030, meaning the pressure on brands with Chinese-linked supply chains will only increase in the years ahead.
This article was written by Eamonn Sheridan at investinglive.com.