Polestar to build Polestar 7 in Europe as US sales ban forces strategic pivot

US regulatory denial triggers a Europe-first strategy

Polestar has announced it is increasing its strategic focus on Europe, where close to 80 per cent of its retail sales volumes are generated, after the US Department of Commerce's Bureau of Industry and Security declined to grant the company authorisation under the Connected Vehicle Rule to sell vehicles in the United States from model year 2027 onwards. The company said it will continue to sell existing stock of the Polestar 3 and Polestar 4 in the US and support customers through its service network, and it is preparing to localise manufacturing of future models in Europe. ²

CarExpert reports that the Connected Vehicle Rule prohibits sales of connected vehicles by manufacturers owned, controlled or subject to the jurisdiction or direction of China or Russia, and vehicles using their covered software. The regulations were proposed under the Biden administration in 2024 and took effect after President Donald Trump returned to office in 2025. CarExpert notes Polestar is majority owned by Geely, whose boss Li Shufu holds just over 55 per cent according to a US Securities and Exchange Commission filing, while sister brand Volvo, also Geely-majority-owned, was granted an authorisation in May allowing it to continue its US growth plans. ⁴

Polestar chief executive Michael Lohscheller framed the shift in regional terms: "The automotive industry is entering a new phase, based on regional dynamics. Our strategy reflects that, with Europe being our largest growth engine and our plan to manufacture Polestar 7 in Europe." In the company's first-quarter 2026 results, 94 per cent of retail sales volumes originated from markets outside the US, and Europe accounted for 78 per cent of total sales. ²¹⁵

Polestar 7 heads to Europe, with Australia waiting until late 2027 or 2028

The centrepiece of the manufacturing pivot is the Polestar 7 compact SUV. Polestar says production of the Polestar 7 is planned in Europe, with the vehicle to be introduced in 2028, as the company diversifies from its current manufacturing footprint across North America and Asia. Lohscheller told the media the brand is entering "the largest EV segment in Europe, the compact SUV segment, which accounts for approximately one-third of total BEV volumes in 2025", and said Polestar is "convinced that we can offer customers a progressive performance-driven car for a very attractive price point, built in Europe". ²⁷

Polestar Cars Australia managing director Scott Maynard told CarExpert the Polestar 7 would arrive locally "right at the back of 2027 – and [could] spill into 2028". CarExpert reports the 7 is expected to be similar in size to the Volvo XC40 and could rival the BMW iX1 and Mercedes-Benz EQA, and notes its late-2027 timing hints the production model could be revealed well ahead of market introduction. ⁷

For Australia, the change marks a potential departure from current sourcing. CarExpert reports that the entire Polestar range for Australia is currently sourced from China, including the incoming Polestar 5 flagship, while the Polestar 3 is also built at the Volvo Cars plant in South Carolina for select markets and the Polestar 4 is produced in Busan, South Korea. Polestar's investor materials confirm the Polestar 4 is built in Busan and that a new variant of the model will be produced there. ⁷²⁵

Model offensive continues into wider segments

Alongside the Polestar 7, Polestar has laid out a product pipeline covering three years: a new variant of the Polestar 4 due in the last quarter of 2026, a second-generation Polestar 2 in early 2027, the Polestar 7 in 2028, and the Polestar 6 roadster. Polestar 5 customer deliveries were set to begin during the northern summer. Chasing Cars reports the Polestar 5 fastback launched with two grades and a starting price of $171,100 before on-road costs, with deliveries expected from mid-year. ²⁶

Chasing Cars reports the new Polestar 4 variant will debut a wagon-style body with a rear window, in contrast to the current coupe's digital rear-view camera, as Polestar targets "the space of an estate... the versatility of an SUV [and]... the dynamic performance that is Polestar". Polestar Australia expects the variant to land locally either late in 2026 or early in 2027, according to CarExpert. ⁶⁷

Australia unaffected, and Maynard sees upside

Polestar Australia moved quickly to reassure local customers. "Polestar Australia will continue to operate as normal; the overnight decision to cease sales of MY27 vehicles in the US will have no impact on the local market here," managing director Scott Maynard said in a statement reported by CarExpert, pointing to the 94 per cent of global sales generated outside the US. ⁴

In a follow-up interview with CarExpert at the local launch of the updated Polestar 3, Maynard suggested the US exit could benefit other markets. "Markets like the US have a raft of varying requirements on design that can differ from Europe and the rest of the world's markets, and so it does actually simplify what needs to be done to be able to develop a new car quickly," he said. He added that Polestar had no plans to exit the US entirely, would maintain sales of existing and used cars plus parts and service commitments, and that no change had been heard of regarding plans to consolidate Polestar 3 production at the Volvo-run South Carolina plant. ³

CarExpert notes that in the first six months of 2026 Polestar delivered 30,423 units worldwide, of which 1861 went to US buyers, compared with 1202 deliveries in Australia, where year-to-date sales were up 2.5 per cent. In 2025 the brand registered 2373 new vehicles in Australia, a 38.5 per cent increase, led by the Polestar 4 with 1295 deliveries, according to CarExpert. ³⁷

Financial backdrop pressures the transformation

The strategy shift comes as Polestar reported a difficult first quarter of 2026. The company's results showed retail sales of 13,126 cars, up 7 per cent year on year, on revenue of $633 million that was essentially flat, but a net loss of $383 million, up 131 per cent from the prior-year quarter, and a gross margin of negative 3.2 per cent. Polestar attributed the margin decline to pricing pressure, EU and US tariffs, lower carbon credit sales and one-off impacts, partially offset by a growing share of higher-margin Polestar 4 in the mix. ¹

On the quarterly earnings call, chief financial officer Jean-François Mady said Polestar's cash position stood at approximately $676 million at the end of March 2026, down from $1.16 billion at the end of 2025, and detailed support from Geely Holding Group including agreed conversions of around $639 million of loans to equity by Geely Sweden and Volvo Cars. Management also outlined a retail expansion to approximately 250 sales points globally by the end of 2026, up from 230 at the end of the first quarter, with sales agent remuneration and one-off personnel costs pushing first-quarter SG&A expenses higher, per the company's results release. ¹⁵