Tesla’s China Shake-Up Could Pave Way for SpaceX Merger
Synopsis
The EV giant is reportedly weighing a separation of its China operations ahead of a possible merger with SpaceX.
Tesla reportedly studied whether to go so far as separating its China operations, as part of initial steps toward a potential merger with SpaceX, according to people with knowledge of the matter.
The proposed measures included spinning off, selling and winding down the China business, but these plans have not yet come to any conclusion and are still at an early stage.
The report comes days after CEO Elon Musk said he wouldn't comment on the idea of merging Tesla and SpaceX on the company's earnings call. Musk denied the claims on social media after the latest report came out, calling them fake news.
Shanghai Operations Remain a Key Global Asset
Any shift in Tesla's Chinese business would impact one of the company's most critical manufacturing operations. The Shanghai Gigafactory started production in late 2019 with more than 950,000 vehicles per year and produces the Model 3 and Model Y for export markets, such as Australia and New Zealand, Europe, Canada and other Asia-Pacific regions, as well as for customers in China.
Over 95% of the parts for the vehicles built in Shanghai are sourced in the region from more than 400 suppliers, Tesla said. China is also playing an important part in the global supply chain for Tesla, with more than 60 suppliers supplying components for the company's factories in other countries.
Tesla reported a record 480,126 vehicles delivered globally in the second quarter of 2026 along with a revenue of US$28.24 billion. China is still the second biggest market for Tesla after the U.S., and the production plant in Shanghai makes up over half of the automaker's worldwide deliveries.
Regulatory Questions Remain Central
The review is reflective of the regulatory issues that might arise with a Tesla-SpaceX pairing. SpaceX is a key defense and government contractor in the United States, and Tesla has established one of the biggest manufacturing facilities abroad in China. But analysts have long seen those cross-border regulatory concerns as a major obstacle in the way of any deal between the two firms.
China's strategic importance is also emphasized by industry data. According to the International Energy Agency's Global EV Outlook 2026, China will remain the world's largest EV market in 2025, with over 60% of global EV sales being driven by the country.
The study by the International Energy Agency (IEA) Global EV Outlook 2026 confirmed that China is the largest EV market in the world, accounting for more than 60% of the global EV market in 2025. Separately, China Passenger Car Association said that it sold a total of 89,091 Tesla vehicles made in China in June 2026, a 24.4% increase over a year ago, benefiting from domestic demand and exports.
Tesla and SpaceX have yet to say anything about a deal, and there is no regulatory filing disclosing a restructuring of Tesla's China operations to be made public. The reported review hasn't been confirmed beyond the initial report, and Musk has been making it clear that there are no plans.
Source: Reuters
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
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