SpaceX already owns xAI, which Elon Musk previously merged with Twitter, but why stop there? Why not squish all of Elon’s companies together and have SpaceX swallow up Tesla, too? The rumor’s been floating around for a while, but it seems Tesla’s operations in China could get in the way of Elon’s dream of his no-longer-a-car-company and his rocket/CSAM company joining together in unholy matrimony. According to the Wall Street Journal, though, Musk has a solution — just get rid of the China business.
It doesn’t sound like Musk and his yes men have settled on a specific plan for Tesla China, but if the WSJ’s sources are correct, it won’t be long before we learn more. Allegedly, “Tesla advisers have discussed possible options for a separation, including a spinoff, sale or closure”, and “some Tesla executives have been told to prepare for a separation of the China business ahead of a potential merger.”
Musk has also reportedly been preparing for another divorce (business-wise, of course) for a while now, the WSJ reports:
Musk in recent years instructed Tesla executives to organize the company with a “laser” between its U.S. and China businesses, according to people familiar with the planning. He wanted to ensure that in the event of geopolitical strife between the two countries, at least the U.S. half of Tesla would survive.
Tesla didn’t respond to the WSJ’s request for a comment, but Musk was kind enough to take a short break from retweeting the most vile racists on the internet to deny the report and call it “fake news.” As anyone who put a deposit down on a new Tesla Roadster can tell you, you can’t trust anything Elon says, but at least for now, that’s his official stance.
This is a great idea that will only go well
While details on Tesla’s plans to separate its operations in China from those in the U.S. are still unavailable, and Elon claims the report is “fake news,” the idea to merge Tesla and SpaceX is nothing new. He’s even suggested in the past that would be his ultimate goal. From the WSJ:
Musk, who is chief executive of both Tesla and SpaceX, has talked up the crossover potential between both companies in recent months as he reorganizes them around artificial-intelligence projects. Investors and analysts have embraced the idea of a merger following a record-setting IPO for SpaceX, which raised $86 billion for the company in June.
“Obviously we can’t talk about, you know, combining companies and that kind of thing on earnings calls,” Musk told investors last week. “It is got to be done with the appropriate process.”
The nativist Trump administration that Elon spent so much money electing has been incredibly hostile toward China and even companies with minimal connections to the Asian superpower, but splitting Tesla China off from the rest of Tesla would be about more than making Trump happy. It would also make it easier for SpaceX to absorb Tesla without jeopardizing the government contracts needed to keep SpaceX afloat while keeping China happy, as well. From the WSJ:
Separating Tesla’s China operations—including an electric-vehicle factory there—would address potential conflicts arising from SpaceX’s work as a major U.S. defense contractor. Such a deal would aim to create a firewall between Tesla’s Chinese subsidiary and its U.S. business.
SpaceX faces significant restrictions due to its dealings with the U.S. government. The company is a major national-security defense contractor, with business lines that include launching top-secret satellites and operating internet services in war zones like Ukraine.
Sales to the U.S. government made up 20.9% of its business in 2025. That business is highly regulated, with the company restricted by export controls and, for some programs, classified government activities.
Elon has options
Elon could, of course, change his mind at any time, but based on the WSJ’s reporting, it sounds like the bigger question is what to do with Tesla China, not whether Tesla should split it off or not. What that would look like, though, remains to be seen. According to the WSJ:
Executives have also discussed creating a separate sales entity to handle exports from Tesla’s Shanghai plant, one of the people said.
Tesla could create separate office systems and bar China-based employees’ direct access to other company units, the person said. While Tesla China already has some autonomy, employees more or less work together around the globe and the top executive in China, Tom Zhu, oversees all of Tesla’s global automotive business.
China is currently Tesla’s second-largest market and the electric automaker has two major factories located in Shanghai. But beyond figuring out how exactly it wants to structure the proposed split, Tesla also has convince the Chinese government to get on board ahead of its merger with SpaceX:
A potential merger between SpaceX and Tesla would likely trigger intense scrutiny from Beijing, given that a major U.S. defense contractor would control Tesla’s factories in China and the factories’ know-how and supply chain could be repurposed for the U.S. military, according to people familiar with the matter. Another concern for Beijing is that a deal could put data of China’s roughly two million Tesla owners in the hands of an American defense company, they said.
In the event of a merger, Beijing would likely seek Tesla’s commitment and business guardrails to prevent the influence of SpaceX on Tesla China and illicit diffusion of dual-use goods such as rare-earth materials from Tesla China to SpaceX, the people said.
No one seems to know when we’ll learn more, but at the very least, if Elon really does try to merge Tesla and SpaceX, it should be entertaining. With SpaceX’s share price collapsing, why not merge it with a car company that’s officially no longer a car company?
