Tesla reportedly weighs selling its China business before SpaceX merger

Tesla is reportedly considering cleaving off its entire business in China to smooth the path toward a merger with SpaceX, The Wall Street Journal reported, citing unnamed sources. Some Tesla executives have been told to prepare for a separation of the China business, which could take the form of a “spinoff, sale or closure,” according to the newspaper.

The company reportedly could carry out that separation fairly quickly, because CEO Elon Musk had already tasked executives with preparing for a split in the event that Beijing invades Taiwan. Separating China from Tesla’s global operations could make it easier to fold the company into SpaceX, which, as a defense contractor, has to follow strict rules around citizenship and national security.

That separation would also represent a major concession: China has become central to Tesla’s business — not just as a market for its vehicles, but as a production hub serving Asia broadly, and Europe as well.

Why it matters

Folding Tesla into a defense contractor bound by strict citizenship and national-security rules would come at a cost: China is not just a market for Tesla’s vehicles but a production hub serving Asia and Europe, per the report.