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Tesla weighs selling China business to clear path for SpaceX merger
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Tesla is exploring a possible exit from its China operations to smooth the way for a merger with SpaceX, according to a new Wall Street Journal report. The report, citing a person familiar with the discussions, says advisers have floated everything from a spinoff to an outright sale to winding down the business entirely. Nothing is finalized, and Tesla and SpaceX have not responded to requests for comment. If such a move happens, it would fundamentally reshape the electric-vehicle maker.
The report lands after months of hints from CEO Elon Musk about combining Tesla and SpaceX. On Tesla’s second-quarter earnings call last week, Musk told analysts that “there is more and more overlap” between the two companies, specifically pointing to Terafab — then abruptly said the topic couldn’t be discussed and handed the question to Tesla’s general counsel. Days later, this report emerged, suggesting the merger talk is more than idle speculation.
The core obstacle is SpaceX’s role as a major US defense and space contractor, with senators already asking the Pentagon to investigate Chinese ownership stake concerns. Folding Tesla’s massive manufacturing presence in China into that entity would be a national-security headache. Giga Shanghai is not a minor asset: it produced Tesla’s 4 millionth China-built car in December, and Tesla’s China chief has said the plant accounts for more than half of the company’s global deliveries, supplying both domestic sales and exports to Europe and Asia.
A forced separation of the China business would eliminate that problem before Washington regulators have to rule on it. One analyst told the Journal that such a move could be a way to “strip out the geopolitical risk” tied to the merger. However, Tesla has not confirmed any specific plan, and the timeline remains unclear.
Reaction from industry watchers has been skeptical but not dismissive. Electrek’s take notes that selling Giga Shanghai would be a stunning reversal for Tesla, since the factory is its most efficient and profitable operation. The outlet argues that offloading the plant that builds half of Tesla’s cars would mark the final step in Musk truly walking away from the EV business, making Tesla an AI and robotics company that happens to sell cars.
If the sale proceeds, Tesla would retain a smaller, more expensive car operation in the US and Germany, wrapped inside a holding company with SpaceX and xAI. That restructuring could help Musk execute what would be his fourth billion-dollar self-deal, with him on both sides of the table. Shareholders who bought Tesla as a carmaker may resist, but Musk’s political capital with the Trump administration could put regulatory pressure aside.
For now, the future is highly uncertain. Musk has not publicly confirmed any plan to sell the China business, and any deal would require complex negotiations and likely government approvals. But the timing — days after a legal deflection on the merger question — suggests the pieces are moving into place. Broader industry trends also point toward a shift: as US-China tensions escalate, many automakers are de-risking their Chinese exposure, giving Tesla’s possible move a firmer rationale beyond just the SpaceX merger.
If Tesla does exit China, it would be a historic reversal for a company that built its global growth on that market. It would leave legacy automakers and new rivals such as BYD to fight over the world’s largest EV market without Tesla’s presence. And it would confirm that Musk’s future vision for Tesla is no longer about electric cars at all, but about artificial intelligence, robotics, and space.
