On July 31, Elon Musk, CEO of Tesla, stated on social media platforms that reports claiming the company will sell or spin off its China business are "false information", and relevant matters have never been mentioned in any discussions.
On July 30 local time in the United States, The Wall Street Journal reported that Tesla (NASDAQ: TSLA) is evaluating its China business, with options including spinning off, selling or shutting it down, in a bid to create conditions for a potential merger with SpaceX.
SpaceX is a commercial aerospace company founded by Elon Musk, with the U.S. government and defense departments among its major clients. If Tesla seeks to merge with SpaceX, it may need to establish internal "firewalls" for the operation of its overseas base businesses. The aforementioned report stated that when Musk first designed Tesla's China business, he already took into account that the Chinese and U.S. businesses should be easy to separate. In recent years, Musk has also instructed Tesla executives to set a laser-sharp clear boundary between the Chinese and U.S. businesses in the company's structure to ensure the future prospects of the U.S. business.
After the report was released, Tesla China was the first to deny it, and Musk made consecutive clarifications on social media late at night local time in the U.S.
The China business is of special significance to Tesla.
In April 2018, China announced the phased lifting of restrictions on foreign capital share ratio in the auto industry, with new energy vehicles being the first sector to open up, and Tesla took the lead. In July of the same year, Tesla signed an agreement with the Shanghai Municipal Government to build a wholly-owned factory. Supported by "China speed", the Tesla Shanghai Gigafactory was completed in October 2019, and began delivering vehicles to customers in January 2020.
When Tesla was preparing to build the Shanghai Gigafactory, it was at a low point of development, and there were even rumors in the market that Tesla was on the verge of bankruptcy. After the completion of the Shanghai Gigafactory, it coincided with the explosion of the new energy vehicle market, and Tesla's sales, revenue and market capitalization rose like a rocket. Tesla's entry into China has disrupted the market pattern, and also stimulated the development of China's new energy vehicle industry to a certain extent. Tesla's entry into China has long been regarded as a classic win-win case.
The production capacity of the Shanghai Gigafactory stands at 950,000 units, ranking first among all Tesla's factories. According to the latest financial report, Tesla has a total of five complete vehicle manufacturing plants around the world. The production capacity of its California plant and Texas plant in the U.S. is 550,000 units and 500,000 units respectively. The Nevada plant, which is used to produce the electric heavy-duty truck Semi, is currently in the equipment commissioning phase. Another overseas vehicle plant of Tesla is located in Berlin, Germany, with a production capacity of 375,000 units.
Tesla has also invested in building an energy storage battery plant in Shanghai with a production capacity of 20 Gigawatt-hours (GWh), which is Tesla's only overseas energy storage battery plant.
The Shanghai complete vehicle and energy storage battery plants also serve as Tesla's export bases. For example, the Shanghai plant undertakes the task of exporting to other markets in Asia, Europe, Canada and other regions.
In recent years, China-U.S. economic and trade relations have witnessed fluctuations. The U.S. has successively taken measures such as imposing additional tariffs or restricting access on Chinese power batteries, electric vehicles and connected software and hardware. Emergencies such as the COVID-19 pandemic, the Russia-Ukraine conflict, and the Middle East wars have also continued to impact the automotive supply chain. It has become a consensus in the automotive industry that supply chains should shift from global layout to regionalization.
Tesla originally had self-built battery plants in the U.S., but in recent years, China's lithium iron phosphate batteries have gained advantages in the market in terms of performance and cost, so Tesla has begun to build relevant supply chains in the U.S. independent of China to cope with China-U.S. economic and trade changes such as tariffs.
According to financial reports, Tesla has a large cylindrical ternary battery plant with a capacity of over 40 GWh in Texas, U.S., and has built lithium refining and cathode material plants in Texas, with capacities that can meet the demand for 30 GWh and 10 GWh of batteries respectively. Tesla has also built a 7 GWh lithium iron phosphate battery plant in Nevada.
More importantly, Musk is leading Tesla's transformation. Tesla has not released any all-new models for many years, and discontinued the Model S and Model X in May 2026. Musk has repeatedly stated publicly that Tesla's most important products in the future will be autonomous taxis and humanoid robots, among which humanoid robots will be Tesla's "largest-scale product ever".
These new businesses require support from artificial intelligence technologies and infrastructure. SpaceX previously merged xAI, a large language model company founded by Musk, and Tesla and SpaceX are cooperating to build a chip factory.
Musk has repeatedly stated publicly that the businesses of his companies have increasing overlaps. The outside world has begun to evaluate the possibility of a merger between Tesla and SpaceX. At Tesla's earnings call held on July 22, Musk did not deny this possibility, only saying that the earnings call was not the appropriate occasion to discuss corporate mergers.
The aforementioned changes have made the prospect of Tesla's China business unpredictable. There is no shortage of calls in the U.S. supporting the merger of the two companies. Anonymous capital market insiders believe that there is no inevitable need for Tesla to merge with SpaceX, as the two companies can fully carry out business cooperation, and there is even less need for Tesla to sell its China business for this purpose.
In November 2025, Tesla just granted Musk a trillion-dollar worth equity incentive plan. So far, Musk has not achieved any of the targets in the plan, and a corporate merger will obviously cause this compensation plan to come to naught.