Tesla CEO Elon Musk has denied a report claiming the electric vehicle maker was considering separating or selling its China business ahead of a potential merger with SpaceX, calling the story "absurdly fake news."
Responding on his social media platform X, Musk said discussions about separating Tesla's China operations had "never even come up."
His comments came after The Wall Street Journal reported that Tesla advisers had explored several options for the company's China business, including a spin-off, sale or closure. The report said the plans were linked to a possible future merger between Tesla and Musk's aerospace company, SpaceX.
China operations key to Tesla
According to the report, executives had also discussed creating a separate sales entity to manage exports from Tesla's Shanghai Gigafactory and restricting China-based employees' access to other company systems.
Tesla's Shanghai Gigafactory is the company's largest manufacturing facility, with an annual production capacity of more than 950,000 vehicles. The plant serves as a major export hub for Europe, Canada and countries across the Asia-Pacific region and has historically accounted for more than half of Tesla's global deliveries.
Unlike many foreign automakers operating in China, Tesla owns its Chinese manufacturing operations outright rather than through a joint venture with a local partner.
Regulatory hurdles
Speculation over a potential merger between Tesla and SpaceX has grown in recent months after Musk declined to rule out combining the companies, citing increasing overlap between their technologies.
However, analysts have warned that such a merger would face major geopolitical and regulatory challenges, particularly in China, where SpaceX's role as a major US defence contractor involved in national security and satellite programmes could trigger scrutiny.
JPMorgan analysts have previously described regulatory approval as a significant obstacle, especially given Tesla's extensive manufacturing footprint and strong commercial presence in China.
Competition in China
China remains Tesla's second-largest market after the United States, although the company faces increasing competition from domestic electric vehicle manufacturers, including BYD.
Tesla has said more than 95% of the components used in China-made Model 3 and refreshed Model Y vehicles are sourced locally through a network of more than 400 Chinese suppliers.
The company also reported that deliveries of China-made Model 3 and Model Y vehicles rose 24.4% year-on-year in June, while second-quarter sales and exports from the Shanghai factory increased 32.8%.
