Polestar shares fell sharply after regulators in Washington declined to grant the company an authorization under the Connected Vehicle Rule, a move that blocks the automaker from marketing vehicles in the U.S. from model year 2027 onward. Mid-day trading saw the stock drop 12.3% following the announcement.
The Bureau of Industry and Security within the U.S. Department of Commerce cited concerns tied to Polestar’s ownership structure - specifically Geely’s majority stake - as the reason the rule applies. The regulation targets national-security issues associated with Chinese-linked connected vehicle software and hardware incorporated in many modern electric vehicles.
The authorization is necessary to sell cars in the United States. Polestar did not receive approval, while Volvo, another brand owned by Geely, had secured a waiver in May. That contrast intensified investor unease because it suggests the denial focused on features specific to Polestar’s governance or technology setup, rather than representing a blanket prohibition affecting all Geely-linked brands.
As a result of the authorization refusal, Polestar said it will stop U.S. operations. The company indicated that parts of its roughly 100-person U.S. workforce, including marketing roles, will be discontinued over the coming months as it ceases activities in the country. CEO Michael Lohscheller sought to position the move as strategic, saying, "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 said it will intensify efforts in Europe, which already accounts for nearly 80% of the company’s retail sales volumes. In the first quarter of 2026 the company reported that 94% of retail sales volumes came from markets outside the U.S., a data point the company used to argue that the direct revenue hit from the U.S. exit is limited.
Despite the relatively small share of sales in the U.S., investors are weighing longer-term consequences for Polestar’s growth prospects and its attractiveness to capital markets as a Nasdaq-listed company now barred from one of the world’s largest auto markets. The Nasdaq Composite declined about 0.3% on the day, indicating the steep drop in Polestar shares was largely idiosyncratic to the company.
Analysts and investors note that the regulatory decision eliminates the optional upside that Polestar’s U.S. presence had represented. The difference between Polestar’s denial and Volvo’s approved waiver has prompted questions about whether Polestar could pursue reauthorization in the future or alter governance or technology arrangements to address the regulators’ concerns.
Financially, Polestar has faced headwinds for some time. The company has struggled to reach profitability and has required repeated capital injections from its owner, Geely. Share declines had previously forced Polestar to execute a reverse stock split last year to preserve its Nasdaq listing. The forced U.S. exit adds another element of uncertainty to the company's already challenged financial outlook.
Contextual note: The information above reflects the company's statements and regulatory actions as reported. The market reaction and company decisions are current as described.