Polestar’s U.S. Exit Faces a Dealer Fight Over Who Pulled the Plug
A New Jersey lawsuit disputes whether federal connected-car restrictions forced Polestar out or gave the automaker cover for a planned departure.
A New Jersey dealer takes the dispute to court
Prestige Imports has sued Polestar after the automaker announced it would stop selling new vehicles in the United States. The New Jersey dealer alleges that the termination violated the state’s Franchise Practices Act and seeks $25 million in damages.
The complaint says Polestar failed to provide the required 60-day notice before ending the franchise relationship. It also alleges that the company offered no legally sufficient good cause. Under the New Jersey law cited in the lawsuit, a manufacturer may terminate a franchise when a dealer has breached its agreements or obligations. Prestige says Polestar did not establish that kind of breach.
The case therefore turns on more than whether new-car sales will end. It asks whether the company can treat a regulatory obstacle as a contractual defense after ending a dealer arrangement without the notice and justification the state law requires. That distinction could determine whether the exit is treated as an unavoidable business event or as an improper franchise termination.
The rule that changed Polestar’s sales plans
The regulatory trigger is the Connected Vehicle Rule, which restricts software used for communications and autonomous-driving functions when it is linked to countries designated as foreign adversaries, including China and Russia. The software restrictions apply with the 2027 model year, while related hardware limits follow for 2029.
Polestar said the U.S. Department of Commerce forced its withdrawal by declining to renew the company’s authorization to sell vehicles under the new requirements. The decision is especially significant because the Swedish brand is majority-owned by China’s Geely, making its connected-car systems subject to the rule’s national-security framework.
Volvo faced the same ownership issue but received special authorization to continue selling connected vehicles in the United States. That different result is central to the dealer’s challenge. Volvo reportedly accepted a demanding compliance process, while Polestar did not receive equivalent permission. The regulatory record gives Polestar a stated reason for leaving, but the Volvo authorization has left dealers questioning whether departure was the only available path.
The allegation that the exit was already planned
Prestige Imports alleges that Polestar had been preparing to leave the American market for two years before the regulatory announcement. The complaint characterizes the government restriction as a mechanism the company used to make that departure appear forced rather than voluntary.
Bernie Moreno, a Republican senator from Ohio and former auto dealer, offered a similar assessment. He said Polestar was losing between $30,000 and $35,000 on each U.S. vehicle and used the rule as a convenient excuse instead of addressing its dealer obligations. Moreno also said Volvo received an exhaustive list of conditions and chose to meet them.
Sweden’s Minister for Foreign Trade Benjamin Dousa described a different level of engagement between the two brands. Dousa said he worked directly with Volvo CEO Hakan Samuelsson, traveled to Washington, and helped secure Volvo’s license. He added that Polestar had not asked him for comparable assistance. Polestar’s failure to appeal the U.S. ruling further supports the lawsuit’s central suspicion, though that interpretation remains a disputed allegation rather than an established court finding.
Dealers face a transition from sales to support
Polestar sent Prestige Imports a force majeure letter two weeks after its June 25 exit announcement. In contract law, Cornell Law School defines force majeure as a provision that can release parties from obligations when an extraordinary event directly prevents performance and is outside the non-performing party’s control.
The practical effect for dealers is narrower than a total disappearance of the brand. Existing 2026 inventory must be sold before dealerships transition into service and support operations. That inventory includes the American-made Polestar 3 and the South Korean Polestar 4, leaving dealers with vehicles to deliver but no announced stream of new products for the American market.
The exposure is limited for the automaker’s global business. In the first quarter of 2026, 94% of Polestar’s sales occurred outside the United States. For a dealer built around local sales, however, the change removes the new-car business while preserving the obligations and infrastructure associated with service, warranty work, and customer support.
Investment promises are now part of the lawsuit
The dealer’s most damaging allegation concerns what Polestar told retailers after the Connected Vehicle Rule had been finalized. Prestige says the automaker continued urging dealers to invest in their facilities while privately planning to leave the country.
The complaint points to Polestar 7 as a future product that was promoted for American customers until the exit announcement. It also alleges that Polestar agreed to a multiyear expansion with dealers as recently as February. If proven, those commitments could make the timing of the withdrawal more consequential than the regulatory decision itself: dealers may have spent money on a sales network for products the company already expected to stop offering.
Prestige is asking for five years of committed parts and warranty support in addition to damages and a declaration that Polestar violated the Franchise Practices Act. The requested remedy reflects the gap between a sales franchise built for ongoing product launches and a service operation left behind after the manufacturer’s departure.