Polestar (Nasdaq: PSNY) announced it will shift its strategic focus toward Europe after the U.S. Department of Commerce's Bureau of Industry and Security denied the company an authorization under the Connected Vehicle Rule, barring it from selling new vehicles in the U.S. from model year 2027 onward.

The Swedish electric vehicle maker said it will continue selling existing stock of the Polestar 3 and Polestar 4 in the U.S. and will maintain customer support through its service network. The company said 94% of its retail sales volumes in the first quarter of 2026 came from markets outside the U.S., with Europe accounting for close to 80% of total retail sales.

Polestar said it plans to expand its European sales network and localize manufacturing of future models on the continent, including the planned Polestar 7 compact SUV. The company also cited Southeast Asia, Eastern Europe, Latin America, and Canada as markets for continued investment.

CEO Michael Lohscheller said in a statement: "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."

The company said customer deliveries of the Polestar 5 are set to begin during the summer. A new variant of the Polestar 4 is planned for the second half of 2026, followed by an updated Polestar 2 in 2027 and the Polestar 7 compact SUV thereafter.