Tesla considers selling its China operations to pave the way for a potential merger with SpaceX

The Wall Street Journal reported on Thursday, citing a knowledgeable source, that Tesla executives received instructions to prepare for spinning off the company’s China operations in anticipation of a potential merger with SpaceX.

The merger between Tesla and SpaceX, both owned by Elon Musk, is expected to raise geopolitical and regulatory hurdles, particularly concerning China, because SpaceX is a major U.S. defense contractor involved in national security and satellite programs, while Tesla operates wholly owned manufacturing facilities in China.

The newspaper added that it remains unclear how quickly Tesla could move on its China operations, and that plans may change.

Citing sources, the paper reported that in recent years Musk had directed Tesla executives to organize U.S. and China operations “with extreme precision” to ensure that at least the U.S. half of Tesla would survive in the event of a geopolitical conflict between the two countries. Unlike many foreign automakers, Tesla’s China operations are not structured as joint ventures with local partners.

Tesla’s Gigafactory in Shanghai remains its largest and most productive plant worldwide, serving as the company’s main export hub for products to Europe and the Asia-Pacific region.