There is a reason why Chinese automotive giant Geely has never sold vehicles directly in the United States, and it has a lot to do with what Washington considers national security. One way around that was by acquiring established foreign brands. Geely now owns several automakers, including the Swedish EV marque Polestar. That strategy, however, has hit another roadblock.

The US Department of Commerce’s Bureau of Industry and Security (BIS) has denied Polestar authorization to sell vehicles in the country beginning with the 2027 model year under the Connected Vehicle Rule.

The regulation restricts the import and sale of certain connected vehicles, as well as related hardware and software, that have ties to China or Russia. According to the BIS, these vehicles could pose national security risks because companies from those countries may be compelled to share sensitive data or provide remote access to connected vehicles operating in the US.

The decision is notable because Polestar’s EVs sold in the US are not even built in China. The Polestar 3 is assembled at Volvo’s plant in Charleston, South Carolina, while the Polestar 4 is produced in South Korea.

Still, US authorities determined that the issue goes beyond where a vehicle is manufactured. The concern centers on ownership, software, connectivity, and the potential flow of data.

China has emerged as the world’s largest vehicle exporter, particularly in the electric vehicle segment. But selling those vehicles in the US has become increasingly difficult amid high import tariffs and tighter regulations aimed at Chinese-connected technology.

Although Polestar will no longer be allowed to sell new vehicles in the US starting with the 2027 model year, the company said it will continue supporting existing customers through its service network. It also plans to keep selling its remaining pre-2027 inventory while supplies last.

Looking ahead, Polestar says it will focus more heavily on Europe, which already accounts for about 80% of its global sales. Volvo, also owned by Geely, is still out of the frying pan, for now.