Elon Musk, CEO of Tesla, has hinted at the possibility of merging his aerospace company SpaceX with Tesla, while the Wall Street Journal reported on July 30 that he is considering selling Tesla's China operations amid U.S.-China competition. However, Musk has denied these claims, labeling them as 'fake news.'
According to the report, Musk has directed Tesla's management in recent years to clearly separate the U.S. and China divisions. This restructuring aims to ensure that at least the U.S. operations can survive in the event of geopolitical conflicts arising from U.S.-China tensions.
Sources indicate that Musk is particularly concerned about Tesla's reliance on lithium iron phosphate (LFP) battery cells from China and the potential disruption to Tesla's semiconductor supply chain, which depends on TSMC, if China were to invade Taiwan. Tesla began producing electric vehicles at its Gigafactory in Shanghai, the first wholly foreign-owned car factory in China, in 2019, and plans to complete its battery plant, the Megafactory, in 2024.
Additionally, some executives have reportedly been instructed to prepare for the separation of the China division in anticipation of a merger with SpaceX. Tesla advisors are said to be considering various options for the China operations, including spin-off, sale, or closure.
This is due to concerns that a merger between SpaceX, which has significant dealings with the U.S. government, and Tesla could raise alarms regarding Tesla's Chinese subsidiary amid U.S.-China competition. The Chinese government is also likely to be vigilant about the potential for Gigafactory expertise and supply chains to be utilized by the U.S. military. Sources suggest that China may demand measures to prevent the illegal transfer of rare earth materials from Tesla to SpaceX.
In February, SpaceX merged with Musk's AI startup xAI, and he recently hinted at the possibility of a merger between SpaceX and Tesla. During a conference call following Tesla's earnings report last week, he stated, 'As you can see from the various collaborations between SpaceX and Tesla in multiple areas, the overlap between the two companies is increasing,' adding that any merger should go through the appropriate procedures.
However, any separation of the China division would significantly impact Tesla and could affect its valuation in a merger with SpaceX, according to the Wall Street Journal. Despite the rise of local electric vehicle manufacturers, China remains Tesla's second-largest market after the U.S.
Meanwhile, Musk has refuted the Wall Street Journal's report about separating Tesla's China operations, calling it 'fake news.' He stated on social media platform X, 'This topic has never been discussed,' asserting that it is 'completely fake news.' Following Musk's denial, Tesla's stock rose 3.53% in the U.S. market on July 30.
* This article has been translated by AI.
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