Elon Musk Rejects Report Claiming Tesla Is Planning China Business Split

Elon Musk has dismissed as "fake news" a report claiming Tesla was preparing to separate its China business ahead of a potential merger with SpaceX. Responding on his social media platform X, Musk said the issue had "never even come up in a discussion ever" and described the report as "absurdly fake news."

Reuters reported that The Wall Street Journal, citing people familiar with the matter, said Tesla advisers had discussed possible options for separating the company's China business, including a spin-off, sale or closure. The report added that the plans were preliminary and could still change.

Report Linked Move to Possible SpaceX Merger

According to the news agency, the reported discussions were tied to the possibility of a future merger between Tesla and SpaceX. Such a merger could face geopolitical and regulatory hurdles, particularly in China.

SpaceX is a major US defence contractor involved in national security and satellite programmes, while Tesla operates wholly owned manufacturing facilities in China.

Earlier this month, Musk did not rule out the possibility of combining Tesla and SpaceX, saying there was growing overlap between the two companies. Reuters reported that JPMorgan analysts have flagged regulatory approvals, especially in China, as a major hurdle for any such deal.

China Remains Central to Tesla's Business

Tesla's Shanghai Gigafactory is the company's largest manufacturing facility and serves as its main export hub for Europe, Canada and several Asia-Pacific markets.

According to the news agency, the factory has an annual production capacity of more than 950,000 vehicles and has historically accounted for more than half of Tesla's global deliveries.

China is Tesla's second-largest market after the United States (US), although the company faces growing competition from domestic electric vehicle maker BYD.

Executives Reportedly Explored Separation

According to Reuters, the reported discussions included creating a separate sales entity to handle exports from Tesla's Shanghai factory.

The news agency also said executives considered setting up separate office systems and restricting direct access between China-based employees and other parts of the company as part of a possible separation.

Tesla has also strengthened its local supply chain in China, sourcing more than 95% of the components used in China-made Model 3 and refreshed Model Y vehicles from within the country. Deliveries of China-made Model 3 and Model Y vehicles rose 24.4% year-on-year (YoY) in June, while second-quarter sales and exports from the Shanghai factory increased 32.8%.