STOCKHOLM/WASHINGTON, D.C.: Polestar said June 25 that it will be forced to stop selling vehicles in the United States from the 2027 model year after the Trump administration declined to authorize the Swedish electric-vehicle maker under rules targeting China-linked connected-car technology.

The company said the U.S. Department of Commerce did not permit it to sell vehicles under the Connected Vehicles Rule, which restricts the import and sale of cars that use certain technology linked to China, effective from the 2027 model year.

The rules cover Bluetooth, Wi-Fi, cellular connectivity, and some satellite communications technologies, citing national security concerns over the potential collection of sensitive data on U.S. vehicle owners.

Polestar shares fell 5.7 percent in early trading.

The rule was adopted in January 2025 under former President Joe Biden and has remained in place under President Donald Trump. It is part of wider U.S. efforts to restrict Chinese-made and China-linked vehicles while supporting domestic car manufacturing.

Imports of Chinese electric vehicles already face high tariffs, while lawmakers have proposed additional restrictions.

Polestar, which is based in Sweden and majority-owned by China's Geely Holding, said it would continue selling existing Polestar 3 and Polestar 4 models in the United States and maintain access to its service network.

The Commerce Department did not immediately comment.

Polestar had warned in 2024 that the connected-vehicle rules would "effectively prohibit" it from selling vehicles in the United States, including models manufactured there.

"The automotive industry is entering a new phase, based on regional dynamics. Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe," Polestar CEO Michael Lohscheller said.

The automaker has increasingly focused on Europe as its U.S. sales remain weak amid greater competition and slower consumer spending. Only six percent of Polestar's first-quarter sales came from the United States, compared with 78 percent from Europe.

Polestar has struggled to become profitable and has received repeated capital injections from Geely and chairman Li Shufu. Its shares have declined sharply, prompting a reverse stock split last year to retain its Nasdaq listing.

The decision also raises questions about the future of the Polestar 3, the company's only model manufactured in the United States.

Volvo Cars, Polestar's sister brand and co-founder, said in May that it had received authorization under the connected-vehicle rules, although it must still ensure its U.S. lineup complies with the requirements.

Volvo makes some Polestar vehicles and said in March it would consolidate Polestar 3 production at its South Carolina plant rather than continue producing the model in Chengdu, China. A Volvo spokesperson said on June 25 that production in China had not yet stopped and that it was too early to say whether the Commerce Department's decision would change those plans.

Polestar expects deliveries of a new Polestar 4 variant later this year and a refreshed Polestar 2 sedan in 2027. Its next entirely new model, the compact Polestar 7 SUV, is planned for production at Volvo's proposed factory in Slovakia.