Polestar loses US dealerships due to Chinese technology ban

What happened?

The US federal government has denied the authorization that would allow Polestar, the Swedish electric vehicle brand owned by Chinese group Geely, to avoid the ban on Chinese technology in connected cars. This prohibition, driven by the Biden administration, is based on national security concerns: connected vehicles can collect sensitive data about drivers and routes, which could potentially be accessible to the Chinese government. The decision was communicated by the Office of the US Trade Representative (USTR) and the Department of Commerce, according to sources close to Wired. As a result, dealerships that have invested in the brand will not be able to sell their cars in the country starting in 2025. The measure is part of the growing geopolitical tension between Washington and Beijing, which seeks to limit Chinese technological influence in strategic sectors such as automotive, where connectivity and software are increasingly critical.

Why is it important?

Polestar represents a emblematic case of how national security legislation can directly impact the automotive market and private investments. The ban affects not only Polestar but any manufacturer that relies on Chinese technological components, such as connectivity systems, sensors, or software. This could reshape global supply chains and force companies to rethink their market strategies. According to data from consulting firm AlixPartners, global automakers invest more than $50 billion annually in Chinese technology for connected vehicles. The US decision could force companies like Ford or General Motors to review their alliances with Chinese suppliers. Additionally, the impact on the electric vehicle (EV) market is significant: Polestar sold around 10,000 units in the US in 2023, according to company figures, and planned to double that number in 2024 with the launch of the Polestar 3 SUV. The ban curbs those ambitions and leaves dealerships with unsellable inventory.

Consequences for dealerships and the brand

Dealerships that bet on Polestar, investing in facilities and training, face millions in losses. According to Wired, some dealerships invested up to $2 million in upgrades and staff. Unable to sell vehicles, many will be forced to close. Polestar could be relegated to a niche market or even abandon the US, one of the largest markets in the world. This also affects consumers who have already purchased a Polestar, as after-sales service and parts availability could be compromised. The brand has stated it will seek solutions, such as updating vehicle software to remove Chinese components, but this is technically complex and costly. Moreover, the decision could have a domino effect: Geely also owns Volvo, which manufactures some models in China and exports them to the US. Although Volvo has not been directly affected, regulatory pressure could expand.

Historical context and comparisons

This is not the first time Chinese technology has faced restrictions in the US. The bans on Huawei and TikTok set precedents. In 2019, the Trump administration banned Huawei over espionage risks, and in 2020 it attempted to block TikTok. However, in the automotive sector, interdependence is greater. Brands like Volvo (also owned by Geely) or even Tesla, which uses Chinese batteries from CATL and LG, could be affected in the future. The measure could accelerate the search for local alternatives or allies like South Korea or Japan. For example, Hyundai and Kia are already developing their own connectivity platforms to reduce Chinese dependence. Unlike the Huawei ban, which primarily affected telecommunications, this restriction directly impacts the automotive supply chain, which is much more complex and globalized. According to a report from the Center for Strategic and International Studies (CSIS), 70% of vehicles sold in the US contain at least one Chinese component in their connectivity system.

What should readers know?

If you are considering buying a Polestar, keep in mind that service and resale could become complicated. Current owners should watch for software updates Polestar may implement to comply with regulations. Investors should be cautious with brands that rely on Chinese technology. The global automotive industry is at a crossroads: geopolitics is redefining the rules of the game. Chinese technology is not only cheap but often leads in connectivity and batteries; doing without it comes at a cost. Replacing Chinese components could increase vehicle prices by 5% to 10%, according to the Institute for Transportation Policy. Additionally, this measure could incentivize local technology production in the US, such as the Biden administration's initiative to subsidize semiconductor manufacturing with the CHIPS Act. In summary, the Polestar case is a thermometer of how the US-China rivalry is reshaping the automotive market, and its effects will be felt for years.