Polestar blamed a federal Connected Vehicle Rule for its US withdrawal. Now a New Jersey dealer is suing for $25 million, alleging Polestar had been planning to leave for two years and used the rule as cover — pointing to sister company Volvo, which secured an exemption Polestar never even applied for.
Polestar's exit from the US market is turning into a legal fight over why it actually happened. Prestige Imports, a New Jersey dealership that operates two Polestar outlets in East Hanover, has filed a $25 million lawsuit in state court alleging that Polestar had been quietly planning to leave the US for roughly two years — and used a federal rule restricting connected vehicles as convenient cover, rather than as the actual cause.
Polestar has said its hand was forced by the federal Connected Vehicle Rule, which bars the sale of new vehicles containing software connected to certain countries, including China and Russia. Starting with the 2027 model year, that rule will prevent Polestar from selling new vehicles in the US, though existing inventory can still be sold. The Department of Commerce declined to renew Polestar's authorization to continue selling connected vehicles in the country.
Prestige Imports argues that story doesn't hold up under comparison to Polestar's own corporate sibling. Volvo, which like Polestar is majority-owned by China's Geely, secured an exemption to keep selling connected vehicles in the US by meeting a demanding set of federal requirements. The lawsuit alleges Polestar had the same opportunity and simply chose not to pursue it.
The strongest piece of circumstantial evidence in the lawsuit is Volvo's outcome. Republican Senator Bernie Moreno of Ohio, who has been vocal about the case, put it bluntly.
"Polestar screwed Polestar, it wasn't screwed by the U.S. government. [There was] a very exhaustive and tough list that Volvo had to follow. Volvo chose to follow it. Polestar used it as a convenient excuse."
— Sen. Bernie Moreno (R-Ohio)Sweden's Minister for Foreign Trade, Benjamin Dousa, added that his government worked directly with Volvo's leadership to help it clear the Commerce Department's requirements — traveling to Washington with Volvo's CEO — but that Polestar never requested similar assistance. Moreno has also claimed Polestar was losing as much as $35,000 per vehicle sold in the US, a figure that hasn't been independently confirmed, which would give the company a clear financial incentive to exit regardless of the regulatory outcome.
For current Polestar owners in the US, existing vehicles can still be sold and presumably serviced, but the brand's new-vehicle future in the country is effectively over starting with the 2027 model year. For dealers like Prestige Imports, the stakes are more direct: franchise agreements typically involve significant capital investment in facilities and inventory, and a franchise termination without proper notice or cause can leave a dealer holding costs it expected to recoup over years of operation.
The bottom line: Polestar's official explanation — that federal regulation forced an unwanted exit — is now being directly challenged in court, with Volvo's contrasting outcome as the central piece of evidence. Neither side's full case has been tested yet, but the timeline the lawsuit lays out, combined with Polestar's decision not to appeal or seek the kind of help Volvo got, raises real questions about whether the Connected Vehicle Rule was the actual reason Polestar left, or simply the most convenient one.
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