Is Tesla Considering Selling Its China Business? Official Response Revealed!

According to sources, Elon Musk, the world's richest man, has recently directed Tesla's senior leadership to establish a 'laser'-clear boundary between its U.S. and Chinese operations. He aims to ensure that, in the event of a geopolitical conflict between the two nations, at least Tesla's (TSLA-US) U.S. operations can survive.

As reported by The Wall Street Journal on Friday, March 31, a person familiar with the discussions said some Tesla executives have been asked to prepare for its China business ahead of a potential merger (referring to a Tesla-SpaceX merger). Another source indicated that Tesla's advisory team has discussed multiple possible scenarios, including spin-offs, sales, or closures.

Sources said Musk is particularly concerned about Tesla's reliance on Chinese batteries and worries that if the Chinese military invades Taiwan, Tesla's access to semiconductors could be threatened.

Musk serves as CEO of both Tesla and SpaceX (SPCX-US). Over recent months, as he drives the restructuring of both companies around artificial intelligence (AI) initiatives, Musk has repeatedly emphasized the potential for cross-collaboration. After SpaceX completed a record-breaking initial public offering (IPO), investors and analysts welcomed the idea of a merger.

Separating Tesla's China operations—including its local electric vehicle factory—would resolve potential conflicts of interest arising from SpaceX's role as a major U.S. defense contractor. The goal of such a transaction would be to build a firewall between Tesla's Chinese subsidiary and its U.S. operations.

In 2025, sales to the U.S. government accounted for 20.9% of SpaceX's business. The company's operations are highly regulated, facing not only export controls but also involvement in government classified activities for certain projects.

According to The Paper, in response to these market rumors, Tesla China labeled them as 'false information.'

The Chinese market, centered on the Shanghai Gigafactory, serves as Tesla's largest global vehicle production base and export hub, as well as a key consumer market.

Official data shows that over half of Tesla's global orders are fulfilled by the Shanghai Gigafactory. Delivery figures indicate that in the first half of 2026, Tesla delivered over 830,000 vehicles globally. The Shanghai Gigafactory delivered nearly 468,000 units—up 28.4% year-on-year—achieving the highest production volume in nearly three years for the same period.