Major car brand warns it could be 'effectively prohibited' from selling vehicles under Biden plans

The automaker, which is majority-owned by China's Geely, could potentially fall foul of new rules cracking down on the use of Chinese vehicle hardware and software.

In comments filed with the Commerce Department, Polestar said proposed rules would bar the sale of vehicles that it builds in South Carolina, as well as those produced in China.

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The Commerce Department has put forward rules that could prohibit connected vehicles from China on American roads, citing national security concerns.

Polestar said 10 per cent of its workforce was in China, while a "substantial portion of its operations" are situated in China, Reuters reported.

Polestar said: "[Commerce] should consider whether a rule that effectively shuts down the operations of a lawfully organized US company with substantial US investments and so many personnel and key decision-making units in friendly nations and the United States is appropriately tailored to address the stated national security concerns."

In February, Geely confirmed that it would be providing full operational and financial support to Polestar after Volvo Cars said it would stop funding the brand.

Volvo Cars confirmed it would no longer provide further funding to Polestar and would extend the repayment period for the existing convertible loan by 18 months to the end of 2028.

Despite the split, it acknowledged that the partnership between Volvo and Polestar had provided benefits for both companies across research and development, manufacturing and sales.

Speaking at the time, a spokesperson for Geely said: "Geely Holding will continue to provide full operational and financial support to the independent exclusive (Polestar) brand going forward.

"This support will not require a reduction of Geely Holding shareholding in Volvo Cars."

Commerce reportedly told Reuters last month that General Motors and Ford Motor would need to stop importing vehicles to the United States from China under the proposed rule.

Ford later told Commerce that the rule could be interpreted to "prohibit the sale of completed connected vehicles by US automakers if those vehicles were assembled within the jurisdiction of a foreign adversary such as by a foreign affiliate of a domestic US automaker".

Ford has called on Commerce to clarify the ruling, stating that the vehicle import prohibition doesn't mean where the final assembly occurs.

The White House announced in May that the tariff rate on electric vehicles under Section 301 would increase from 25 per cent to 100 per cent for vehicles made in China.

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The briefing stated: "A 100 per cent tariff rate on EVs will protect American manufacturers from China’s unfair trade practices.

"This action advances President Biden’s vision of ensuring the future of the auto industry will be made in America by American workers."