Volvo Cars has had great success evolving from the wagons it was long known for into crossovers combining utility and driving smoothness.

Its XC90 7-seat CUV introduced in 2014 and now the battery-electric version, the EX90 introduced last year, are popular with fans of the Swedish brand, controlled by Chinese holding company Geely.

And while its CUVs sold in the U.S. are built at Volvo’s plant in South Carolina,  thus enabling it to escape Trump Admin. tariffs, a rule from the Biden Admin. is still in place, which effectively bans the import or sale of vehicles containing Chinese-connected vehicle system components, even if assembled in the U.S., if they are owned or controlled by entities from China or Russia. The ban goes into effect with the 2027 model year.

This ban is hanging over the windshields of both Volvo and Polestar, both controlled by Geely, like a grand piano hanging by a fraying rope.

One of the few issues Republicans and Democrats agree on these days is keeping China-made and -designed software out of the U.S. Sen. Josh Hawley (R-MO) has a bill, “The Protecting American Autoworkers from China Act,” which increases base tariffs on China-built vehicles, no matter the manufacturing location, to 125%.

Additionally, Sen. Elissa Slotkin (D-MI) has introduced the “Connected Vehicle National Security Review Act,” aimed at safeguarding national security by regulating the entry of connected vehicles and components from countries of concern, notably China. The bill mandates a formal review process for connected vehicles and components manufactured by entities under the jurisdiction of countries deemed a national security concern, including China.

“Lots of deals and carve-outs are possible with the Trump White House, as we are seeing on everything,” one Hill staffer working in the Congressional Auto Caucus tells WardsAuto on background because they are not authorized to speak on the matter. “The whole place has been fixated on the budget bill, but it’s on the agenda to sort out in the Fall. This is China, though, not Europe, and members, even those in South Carolina, are having a hard time swallowing a deal that benefits Geely or any Chinese automaker.”

Geely holds 78% equity in Volvo Cars and 82% of the voting stock. Volvo owns a 48% stake in Polestar. Both companies are publicly traded. Geely and its two subsidiaries have structured the ownership of the company in a way to try to avert anti-Chinese politics in the U.S. and EU. But it’s a tough sale.

Volvo and Polestar’s senior management did not want to be interviewed on the issue. However, via a statement, the Volvo is leaning into the claim it is still part of a Swedish automaker while touting their U.S.-based manufacturing and retail activities.

“Based in Gothenburg, Sweden, Volvo Cars has been doing business in the U.S. for 70 years, selling cars through a network of more than 280 independent retailers and investing $1.35B in our South Carolina manufacturing plant, a Volvo spokesman tells WardsAuto. “Our broader impact includes leading federal motor vehicle safety standards that have saved countless lives. We are proud of our investment and legacy in the U.S. and want to do more to grow here and continue to support American customers and communities. Volvo Cars [operating in the U.S. since 1956] follows government rules wherever we operate, and we look forward to clarifying the details of these rules in the coming months in dialogue with the U.S. authorities.”

Both Volvo and Polestar have had recent management changes designed to try and navigate the problems their Chinese control is presenting.

Less than a year after taking over as president at Polestar North America, Anders Gustafsson left the electric car maker May 11. Rick Bryant, Polestar North America’s operations chief and a Volvo Cars veteran, took over the job. That change followed closely a change at Volvo’s global c-suite with Håkan Samuelsson returning as CEO of Volvo Cars last April.

Challenges Even Without Anti-China Sentiment

Both companies are already facing challenges in the U.S.; for Polestar, the challenges are global and transcend tariffs and politics. It has significant challenges generating brand awareness and consideration in the States.

Bernstein analyst Daniel Roeska sees a dim future for Polestar. "Polestar is on a road to nowhere," primarily due to its inability to match the aggressive price cuts made by Tesla and BYD, the analyst recently wrote.

Shares in Volvo Cars, which in April withdrew its earnings forecast for the next two years in the face of tariffs and the other complicating factors around anti-China regulations, are down 29% year-to-date. Polestar’s shares are trading under $1.10, and the most enthusiastic target prices are about $1.20. There was a May surge in Polestar, a 7% bump, after the company reported an 84% increase in year-over-year revenues, improved margins and narrower net losses.

Volvo has announced an 18 billion SEK ($1.87 billion) cost-cutting plan, which includes layoffs and a restructuring of its U.S. operations. Last May, Polestar reported that its first-quarter net loss had narrowed by 31% and adjusted EBITDA improved by 46%. The company is shaving headcount and marketing and promotion spending, it says.

Both Volvo and Polestar also are facing fierce competition from an increasing number of BEVs from better-known and better-represented automakers.

Volvo Imports Not Sustainable in U.S.

Volvo will need up to two years to expand its U.S. car production to avoid hefty import tariffs, Samuelsson recently told news outlet Dagens Nyheter. Samuelsson said it would not be sustainable for the company in the long term to sell European-made cars in the United States at a 27.5% tariff, and importing from the company's Chinese plants was "impossible" given the much higher U.S. tariffs on China, as well as political opposition.

"In the short term, within one to two years, it will be about selling the cars we have," he said, adding the situation would put pressure on profit margins while customers will also have to pay more. Samuelsson says Volvo Cars is working toward increasing production in the U.S. as a response to tariffs.

Polestar today sells the China-built Polestar 2 and Polestar 3, made in South Carolina and China, in the U.S. The Polestar 4 compact coupe-SUV is produced in South Korea, and due to hit dealerships in the fourth quarter.

Polestar, too, is planning on moving more of its manufacturing to the U.S. and Europe to reduce reliance on China. But none of those moves exempt the companies from the crackdown on China-made, China-designed or China-owned software systems. Volvo and Polestar are looking to see if there is a way to pivot on its software supply chain, but Chinese ownership would remain an issue in 2027.

As lobbying takes place over the next months, it does not appear thus far that either of South Carolina’s senators are likely to go out on a limb for Volvo. Sen. Lindsey Graham (R-SC) has advocated for delisting Chinese companies with "golden share" structures from U.S. stock exchanges. These structures allow the Chinese government significant control over corporate decisions, raising concerns about foreign influence and national security. Sen. Tim Scott (R-SC) introduced legislation last year, the Blocking Bad Batteries ACT, which prevents federal agencies from purchasing batteries from Chinese-linked suppliers – a measure that would not impact Volvo and Polestar much, but it reveals his voting perspective.

The Hill staffer connected with the Congressional Auto Caucus tells WardsAuto that the real benefit to South Carolina lawmakers are the jobs that the company’s factory provides. “But with tariffs driving some manufacturing back to the U.S., the feeling is that the plant won’t be idle for long if Volvo and Polestar can’t meet the 2027 regs.”