Tesla CEO Elon Musk has strongly denied a report claiming the electric vehicle giant was considering separating or selling its China business ahead of a potential merger with SpaceX, calling the story “absurdly fake news.”
Responding on his social media platform X, Musk dismissed the claims outright, saying discussions about separating Tesla’s China operations had “never even come up.”
His remarks came after The Wall Street Journal reported that Tesla advisers had explored multiple options for the company’s China business, including a spin-off, sale, or even closure. The report suggested the discussions were linked to a possible future merger between Tesla and Musk’s aerospace company, SpaceX.
Tesla’s China Business Remains Crucial
Tesla’s Shanghai Gigafactory remains the company’s largest production facility, with an annual manufacturing capacity exceeding 950,000 vehicles.
The factory serves as a major export hub for Europe, Canada, and several Asia-Pacific markets and has historically contributed more than half of Tesla’s global vehicle deliveries.
Unlike many international automakers operating in China, Tesla fully owns its manufacturing operations in the country instead of relying on a joint venture with a local partner.
The Wall Street Journal report also claimed executives had discussed creating a separate sales entity for exports from the Shanghai factory and limiting access by China-based employees to certain internal company systems.
Potential Tesla-SpaceX Merger Faces Challenges
Speculation surrounding a possible merger between Tesla and SpaceX has increased in recent months after Musk declined to rule out combining the two companies, citing growing technological overlap.
However, industry analysts have warned that such a move would face significant regulatory and geopolitical hurdles, particularly in China.
As SpaceX is a major US defense contractor involved in national security and satellite programs, any merger could attract intense scrutiny from Chinese regulators because of Tesla’s extensive manufacturing presence in the country.
Analysts at JPMorgan have previously described regulatory approval as one of the biggest obstacles to any potential Tesla-SpaceX combination.
Competition in China’s EV Market
China remains Tesla’s second-largest market after the United States, but competition has intensified as domestic automakers continue expanding their market share.
Chinese EV giant BYD has emerged as one of Tesla’s strongest rivals, increasing pressure in the world’s largest electric vehicle market.
Tesla says more than 95% of the components used in China-made Model 3 and refreshed Model Y vehicles are sourced locally through a network of over 400 Chinese suppliers.
The company also reported that deliveries of China-made Model 3 and Model Y vehicles rose 24.4% year-on-year in June, while second-quarter sales and exports from the Shanghai Gigafactory increased 32.8%, highlighting the continued importance of its China operations.
Musk’s latest statement appears aimed at ending speculation, reaffirming that Tesla has not considered separating or selling its China business despite ongoing reports.
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