Tesla has asked senior staff to prepare contingency plans to separate the company's China operations in advance of discussions about a possible merger with SpaceX, according to a person familiar with the talks. Advisers to Tesla have looked at several pathways for a separation - including spinning the unit off, selling it, or shutting it down - but details about timing and execution remain unclear and could change.
Gigafactory Shanghai is central to Tesla's global manufacturing footprint. The plant is described as the automaker's largest and most productive facility worldwide, serving as a major export hub for both Europe and the Asia-Pacific region. Historically, the Shanghai factory has accounted for more than half of Tesla's worldwide deliveries and has an annual production capacity in excess of 950,000 vehicles.
Despite the export role of Giga Shanghai, China itself ranks as Tesla's second-largest market after the United States. The company faces intense competition from local manufacturers, with BYD specifically noted as exerting pressure on Tesla within the Chinese market.
Earlier this month, Tesla's chief executive left open the possibility of a merger with SpaceX, declining to rule out combining the EV maker with his other company and noting increasing overlap between the businesses. SpaceX's president and chief operating officer also acknowledged potential advantages to merging, telling CNBC that folding the companies together "might make Elon’s life a little easier" by simplifying management across his enterprises.
Analysts at JPMorgan have flagged a "practical bottleneck" around obtaining necessary regulatory approvals for a merger, especially in China. They highlighted that national security concerns tied to SpaceX's relationships with the U.S. government could complicate approvals in that jurisdiction.
SpaceX completed a public offering last month, in what was reported as a record $75 billion initial public offering, and was valued at $1.48 trillion as of Thursday's close. Tesla's market capitalization was reported at $1.22 trillion.
Context and caveats
People involved in the discussions said advisers are considering multiple structural options for the China business, but there is no firm timeline and plans are subject to change. Tesla and SpaceX did not provide comment outside of normal business hours.