On the Dash:
- Tesla executives are reportedly preparing to separate the company’s China business ahead of a potential SpaceX merger.
- CEO Elon Musk denies the report, calling it “fake news” in a post on X.
- A merger would force Tesla to shield SpaceX’s defense work from Chinese regulatory scrutiny.
Tesla CEO Elon Musk is denying reports that the company is preparing to separate its China business ahead of a potential merger with SpaceX, calling the claim “fake news” in a post on X.
This has never even come up in a discussion ever.
Absurdly fake news.
People should assume news is fake until proven otherwise.
— Elon Musk (@elonmusk) July 31, 2026
Some Tesla executives have been advised to prepare for a potential separation. However, The Wall Street Journal reported that Tesla advisers are exploring various options, including a spinoff, sale, or closure.
Musk instructed executives in recent years to keep a clear line between Tesla’s U.S. and China businesses, according to people familiar with the planning. The goal was to protect the U.S. side of the company if tensions between the two countries escalated, particularly over Taiwan. Musk was concerned that a Chinese invasion of Taiwan might block Tesla’s access to chips from Taiwan Semiconductor Manufacturing Co. and also worried about battery materials sourced from China. The internal goal was to be prepared by 2026 or 2027.
Notably, Tesla began requiring suppliers to eliminate China-made components from vehicles built at its U.S. factories last year, citing tariffs and geopolitical tensions. That effort aimed to fully transition Tesla’s U.S. manufacturing away from Chinese-sourced parts within one to two years.
Merging with SpaceX presents unique challenges. SpaceX, a key U.S. defense contractor, would require separation from Tesla’s China operations to shield that segment from Chinese regulatory oversight. According to insiders, executives have considered establishing a distinct sales entity for Shanghai exports and restricting China-based employees from accessing other company systems.
China made up about 18% of Tesla’s global sales in the first half of 2026, and its Shanghai plant is not structured as a joint venture, unlike many competitors’ China operations. Additionally, Musk addressed merger speculation on Tesla’s earnings call last week, telling investors the company couldn’t discuss combining businesses in that setting.
