Elon Musk Denies Reports of Tesla China Divestment for SpaceX Merger

Elon Musk, CEO of Tesla and SpaceX, has repeatedly dismissed reports from The Wall Street Journal claiming that Tesla is considering selling, spinning off, or closing its China operations to facilitate a potential merger with SpaceX. Elon Musk labeled the reports as "absurdly fake news," asserting that the topic had never been discussed. Tesla's China unit also characterized the reports as false information.

The reports alleged that Tesla executives were exploring a structural separation of the China business to mitigate geopolitical risks and shield SpaceX's classified U.S. defense work from Chinese regulatory scrutiny. Such a move would create a firewall between U.S. operations and Chinese assets, potentially preparing for conflicts regarding Taiwan. These measures align with SpaceX's current implementation of Non-China, Non-Taiwan supply chain requirements to protect sensitive technology.

While Musk denies the specific plan, he has acknowledged an increasing overlap between the two companies, including a project called Terafab, and noted that any merger would require the "appropriate process." The potential tie-up faces significant hurdles from the Government of China, which fears that a merger would place the data of millions of Chinese Tesla owners and industrial know-how under the control of a primary U.S. national security contractor.

Tesla's Gigafactory Shanghai remains a critical asset as the company's most productive plant globally. However, the company faces intensifying competition in the Chinese market from domestic rivals such as BYD, Xiaomi, Xpeng, and Li Auto.