Polestar recently announced its decision to leave the U.S. market due to the Connected Vehicle Rule that bans cars with software linked to countries such as China and Russia. However, the announcement seemed odd, considering that Volvo, Polestar's Geely-owned sister company recently received a special authorization from the Department of Commerce to continue selling connected cars stateside.

That suspicion is now the basis of a lawsuit by New Jersey Polestar dealer Prestige Imports, who's claiming that Polestar had been planning its U.S. exit for two years and used the government ruling as a cover up.

According to Automotive News, Prestige Imports is suing Polestar for violating New Jersey's Franchise Practices Act. The act claims that a company can terminate a franchise if the dealer breached any of its agreements or obligations. The lawsuit alleges that Polestar did not give its dealers the required 60-day notice or provide any "good cause."

2026 Polestar 3 (European specification)

Photo by: Polestar

Polestar claims that the U.S. government forced its hand, as the Department of Commerce declined to renew the company's authorization to continue selling vehicles in the country. However, the lawsuit alleges that Polestar had similar opportunity as Volvo to continue selling cars here. Volvo had to jump through a bunch of hoops, and meet certain requirements, but it was apparently willing to comply. Prestige Imports is accusing Polestar of willfully declining to meet those requirements or jump through any hoops. 

"Polestar screwed Polestar, it wasn't screwed by the U.S. government," Bernie Moreno, Republican Senator from Ohio, told CBT News in July. "[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." 

Moreno claims that Polestar was losing as much as $35,000 per car in the U.S. So rather than decide to pull out in a timely fashion and give dealers the proper notice, it used the restrictions as a pretext. 

Now, at first, that might just sound like a sour dealer and a government official trying to pin the blame on Polestar. However, Sweden's Minister for Foreign Trade Benjamin Dousa said that he worked very closely with Volvo to make sure it met the requirements to stay in the U.S. but Polestar didn't ask for the same help. 

“I was personally very involved in the Volvo Cars issue and traveled with CEO Hakan Samuelsson to Washington and did what I could to ensure that the company would receive its license,” Dousa said, per Automotive News. “But Polestar has not asked for help.”

Polestar also never appealed the U.S. ruling, which doesn't help the suspicion. So the lawsuit essentially claims the Polestar knew it wouldn't meet the requirements to stay. That way, it could exit quickly and seem as if its hand was forced. Making matters worse for dealers is that the suit also claims that Polestar continuously pushed dealers to invest, and as recently as February 2026, agreed to a multiyear expansion, all while knowing it would eventually leave the country. 

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