▲ Tesla
The Wall Street Journal (WSJ) reported on the 30th (local time) of last month that electric vehicle maker Tesla is considering selling its China business with an eye toward a potential merger with aerospace company SpaceX.
According to sources cited by the WSJ, some Tesla executives have been instructed to prepare for the separation of the China business in anticipation of a possible corporate merger.
Additionally, Tesla's advisory group has discussed various separation options, including a spin-off, sale, or withdrawal from the market.
Tesla operates two large-scale factories in Shanghai, China.
One source stated that Tesla executives also discussed establishing a separate sales entity to handle export volumes produced at the Shanghai plant.
According to the WSJ report, Elon Musk, CEO of Tesla and SpaceX, has previously structured Tesla's China operations to be easily detachable from its U.S. business, taking geopolitical tensions between the United States and China into consideration.
The intent is to ensure the survival of the U.S. business at the very least, even if conflict arises between the two countries.
However, sources noted that it remains unclear how quickly Tesla could spin off or sell its China business, and plans could still change.
In response to the WSJ report, Musk fired back on his X account, stating, "It has never even been discussed," and dismissing it as "absurd fake news."
Rumors of a merger between Tesla and the recently listed SpaceX have circulated steadily in the market.
Over recent months, Musk has also emphasized the potential for synergy by reorganizing the two companies centered around artificial intelligence projects.
The WSJ explained that the backdrop behind Tesla's consideration of selling its China business lies in SpaceX's unique status as a major U.S. defense contractor.
Separating Tesla's China operations, including its EV plants, could resolve potential conflict of interest issues that SpaceX, heavily regulated due to its dealings with the U.S. government, might face.
There are also projections that a merger between SpaceX and Tesla would likely face rigorous scrutiny from Chinese authorities.
This is because a U.S. defense contractor would control Tesla's factories in China, and the plants' know-how and supply chains could potentially be utilized for U.S. military purposes.
Sources reported that Chinese authorities are concerned that upon a merger of the two companies, data from approximately 2 million Tesla owners in China could end up in the hands of a U.S. defense firm.
For Tesla, China is its second-largest market after the United States, accounting for approximately 18 percent of its revenue as of the first half of this year.
(Photo: Yonhap News)
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