Divesting China? Tesla reportedly considering sale of China business; Musk quickly responds

The Wall Street Journal reported that Tesla is exploring the sale of its China business, a move reportedly aimed at facilitating a potential merger with SpaceX. According to sources familiar with the matter, Elon Musk had previously instructed Tesla executives to establish a clear separation between the company's U.S. and China operations.

This directive was intended to safeguard Tesla's American business in the event of geopolitical conflict between the U.S. and China. The report suggests that some Tesla executives have been tasked with preparing for the divestment of the China operations ahead of the potential merger with SpaceX. Advisors have reportedly discussed various divestment strategies, including spin-offs, sales, or closures.

Such a move would have significant implications, as Tesla's China operations have been crucial to its transformation into a leading global electric vehicle manufacturer. The potential merger with SpaceX could also be affected by the valuation of Tesla's assets. The timeline for any divestment remains uncertain, and plans could change.

Concerns cited include Tesla's reliance on China for batteries and the potential threat to semiconductor supply chains should China invade Taiwan. Sources indicate preparations are being made for contingencies in 2026 or 2027, anticipating potential conflicts. The separation aims to create a firewall between Tesla's U.S. and China businesses, particularly relevant given SpaceX's status as a major U.S. defense contractor.

However, Elon Musk swiftly refuted the report on his social media platform X, labeling it as 'fake news.' The article notes that U.S. companies commonly develop contingency plans for their China operations, citing examples like Starbucks and Yum Brands, which have previously divested or spun off their Chinese businesses.

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This is fake news.