Dealers weigh investments after Polestar’s U.S. exit
Polestar will not appeal a U.S. Commerce Department ban on selling future models and will instead exit the U.S. market, the company confirmed July 20. The decision leaves the Swedish electric-vehicle maker’s 32 U.S. dealers to weigh the status of their investments while customers face potential losses in resale value.
The Commerce Department’s decision is among the first results of a new U.S. rule that bans Chinese software in new vehicles that connect to the internet, starting with the 2027 model year. Officials spanning the Biden and Trump administrations have cited concerns that cameras, satellite connections and other data links in connected vehicles could be exploited by a foreign adversary.
Polestar, controlled by Chinese auto giant Zhejiang Geely Holding Group, had a path to ask the Commerce Department to reconsider or to take the matter to court. A Polestar spokesman said the company had “significant dialogue” with U.S. authorities and did not believe an appeal would have succeeded. “We will instead focus our investments on markets where we have a strong brand position and ability to achieve profitable growth, with a strong weighting towards Europe,” spokesman Michael Ofiara said.
Polestar’s 32 U.S. dealers said they invested significant capital into showrooms, sales training and other preparations in hopes the brand would be a contender in the luxury auto space. Many said they remain baffled that Polestar was unable to obtain authorization to keep selling in the U.S. when Volvo, also majority-owned by Geely, received that approval in May and continues to sell in the country.
“We deserve some answers,” said Matthew Haiken, president of Prestige Collection Auto Group and one of Polestar’s largest U.S. dealers. Haiken said he had been spending “millions” to build a Polestar dealership off a highway in East Hanover, N.J., meant to replace a mall space where he had sold cars since 2021. He paused construction after the ban was announced and said the decision not to appeal was “really upsetting to hear.”
Polestar is offering discounts of up to $25,000 on its remaining inventory to clear out stock, according to the spokesman. Jason Stein, managing partner of investment bank Presidio Group, said U.S. consumers who bought Polestar cars may suffer a massive hit to their resale values.
The company sold 5,747 EVs in the U.S. last year, with the country accounting for 6% of its global sales. The Polestar 3 model is built at Volvo’s plant in Charleston, S.C., on the same platform as Volvo’s EX90 SUV. The Chinese-made Polestar 2 sedan was discontinued in the U.S. due to 100% tariffs on EVs built in that country. The Polestar 4 is manufactured in South Korea at a Renault-Geely plant to reduce tariff exposure.
The Commerce Department declined to comment on why Volvo received authorization and Polestar did not. Ulrika Swanson, a Washington, D.C., attorney with Cassidy Levy Kent, described the process as “a black box in terms of why something is authorized and why something isn’t.”
Alan Haig of Haig Partners, a dealership M&A firm, said the U.S. ban may have given Polestar cover to exit amid a difficult business climate. “The market has definitely shifted against EVs,” Haig said, noting that Polestar is one of more than a dozen brands competing for the small slice of the U.S. market represented by fully electric vehicles.
State franchise laws may further complicate Polestar’s exit. Russell McRory, a New York attorney who represents dealers, said state statutes typically require automakers to compensate dealers when they withdraw, often by buying back unsold cars or paying the franchise’s fair market value. McRory said being forced out by the U.S. government likely does not absolve Polestar of those obligations. “A termination is a termination,” he said. “For the most part, these state statutes are going to apply regardless of the reason.”
Polestar’s spokesman said the company is not terminating dealerships and is working with retailers to “manage this transition.” He added that Polestar will continue selling existing stock and supporting customers through sales, service and aftersales activities.
Haiken continues to sell Polestars at a temporary space next to his under-construction dealership in New Jersey. He said business has been strong since Polestar slashed prices, putting the cars “in line with the market.” He is considering how to redeploy his Polestar employees to his Volvo store and has fielded calls about job opportunities from people at Polestar’s U.S. headquarters, he said. “A lot is up in the air right now,” he said.