Beijing Observation: Will Tesla and SpaceX Merge? Musk Faces Biggest 'Amputation' Challenge Amid US-China Geopolitical Tensions

Recently, rumors about Tesla considering selling its China business have become the market focus. The U.S. media Wall Street Journal confirmed this information. Some senior executives of Tesla have been instructed to prepare for the 'separation' of China business, and consulting teams have discussed options such as splitting, selling, or closing. One of the purposes is to remove geopolitical and regulatory barriers for a potential future merger with SpaceX.

However, Musk almost immediately responded on X, stating, 'This has never appeared in any discussion. Absurd fake news.' Tesla's China-related personnel also clearly stated to Chinese media that it is 'false information.'

SpaceX has become an important defense contractor in the United States, with business covering secret satellite launches and battlefield star chain services, accounting for a significant portion of revenue from the U.S. government. If Tesla and SpaceX merge, it would directly tie an electric vehicle company with a fully-owned large factory, supply chain, and data in China to the U.S. national security system. Washington will be concerned, and Beijing will be equally concerned. The data of about 2 million Tesla car owners in China, the technology and production capacity of the Shanghai factory, may all be considered sensitive assets.

In recent years, Shanghai Super Factory has been one of Tesla's most successful overseas investments. Since its operation in 2019, the Shanghai factory has gradually become Tesla's largest global manufacturing base, not only supplying the Chinese market but also exporting to Europe, Canada, and the Asia-Pacific region. By 2025, more than half of Tesla's global deliveries will come from the Shanghai factory, with an annual production capacity of nearly 950,000 vehicles, and the local parts supply rate in China exceeds 95%.

If the China business is indeed sold, it means Tesla will lose the global production center with the lowest cost and highest efficiency. This is not just a general company selling overseas assets but is closer to a corporate 'amputation.'

When SpaceX went public, Musk was in Texas, but he delivered a speech remotely. (Image source: Wall Street Journal)

Compared to many Chinese new energy vehicle (electric vehicle) companies that popularize '996' or even higher intensity work hours, Tesla has maintained a relatively complete overtime system, social insurance, and employee benefits in China. The salary treatment is also competitive in the manufacturing industry. Therefore, in the eyes of many Chinese job seekers, Tesla has always been seen as a foreign company with relatively good treatment and management systems closer to international standards.

Therefore, if Tesla one day chooses to sell its China business, it will not only affect the global supply chain but may also impact the work environment of tens of thousands of Chinese employees. For many employees, leaving Tesla is not just changing to another company but may also mean returning to a more competitive and longer working hours domestic automotive industry.

A Tesla car reflects China's contradictory psychology towards American technology. Tesla has always had a special brand symbol in China. For many Chinese middle-class people, buying a Tesla is not just buying an electric car but is like experiencing Silicon Valley technology culture and, to some extent, represents an identification with American innovation. Before China's new energy vehicles fully rose, 'driving a Tesla' was an important identity symbol for urban new middle-class people.

However, the Beijing authorities have always maintained caution towards Tesla. Since 2021, some military facilities, government agencies, and some sensitive units in China have restricted the entry of Tesla vehicles into certain areas due to concerns about data security and the possibility of in-vehicle cameras collecting information. There have also been multiple reports from outside that some local governments and key state-owned enterprises have instructed employees to avoid driving Tesla vehicles into office areas and even restrict certain personnel from purchasing Tesla vehicles. Although the Chinese government has not released such regulations, they vary by department and region.

Thus, an intriguing scene has emerged: on the streets of China, Tesla remains one of the most successful American car brands; but when entering some government compounds or military facilities, it may become a vehicle not allowed inside.

March 11, 2025. U.S. President Trump and Tesla CEO Musk sit in a Tesla car and talk to reporters. (AP)

This market rumor: Why specifically 'China business'?

In recent years, Musk has indeed required Tesla to draw a 'laser-clear' line between its U.S. and China businesses: restricting personnel, data, and system interoperability to ensure that at least the U.S. side can survive independently in case U.S.-China relations deteriorate. This 'firewall' thinking was originally prepared for risks such as potential conflicts in the Taiwan Strait, semiconductor supply cuts, and battery dependence, but is now interpreted by outsiders as pre-merger operations for Tesla and SpaceX.

The significance of the Shanghai factory to Tesla has long surpassed being the 'second-largest market.' It is the critical turning point for Tesla's mass production and profitability and an important hub for exports to Europe, Canada, and Australia.

Similarly, SpaceX is no longer just a commercial aerospace company but is deeply involved in the U.S. Department of Defense, intelligence systems, and satellite communication construction, becoming an important supplier to the U.S. national security system.

If Tesla and SpaceX further integrate, they will inevitably face new regulatory issues. A company that closely cooperates with the U.S. military while controlling large-scale manufacturing bases, numerous supply chains, and data systems in China will be difficult for both Washington and Beijing to accept without question.

September 18, 2023, Tesla's factory in Fremont, California. (AP)

Western capital is moving from 'Made in China' to 'China isolation'?

As early as a few years ago, Musk required the company to establish clearer distinctions between its U.S. and China businesses, hoping that even if relations between the two countries deteriorate, both U.S. and China businesses can operate independently.

This is completely different from the 'global integration' thinking pursued by multinational corporations ten years ago.

Tesla was once a benchmark in China's new energy vehicle market, but now, Chinese domestic brands are rapidly rising. BYD, Xiaomi, Xpeng, and Li Auto are continuously expanding, and Tesla is facing unprecedented competitive pressure in China. Coupled with the Chinese government increasing specific subsidies for Chinese domestic car companies, the resulting unfair competition has made many foreign companies unhappy.

Therefore, even without geopolitical factors, Tesla must already rethink its positioning in the Chinese market. China remains the world's largest new energy vehicle market but is no longer a 'comfort zone' for foreign brands.

Over the past decade, multinational corporations pursued 'global optimal allocation'; now, they are thinking about 'if the world splits, how will the company survive.'

From supply chain reorganization, chip export controls, to artificial intelligence, satellite communications, and new energy vehicles, U.S.-China competition is step by step changing the organizational structure of multinational corporations.