Tesla CEO Elon Musk has dismissed as "fake news" a report claiming the electric vehicle maker was exploring a separation or sale of its China business to ease regulatory hurdles for a potential merger with SpaceX.
The Wall Street Journal had reported that Tesla executives were evaluating multiple options for the China business, including a spin-off, sale or even a shutdown, though it said no final decision had been made.
Musk has not announced any plans to merge Tesla with SpaceX. However, his recent remarks about growing operational overlap between the two companies have fuelled speculation over a possible tie-up.
Also Read: US Bans Chinese Humanoid Robots That Musk Called Tesla's Biggest Rivals
China Separation Could Ease Regulatory Concerns
As SpaceX is a major US defence contractor, merging it with Tesla, which runs fully owned factories inside China, might be complicated.
The Wall Street Journal said separating Tesla's China operations could help address regulatory concerns if the company were to pursue a merger with SpaceX, a major US defence contractor. Tesla operates wholly owned factories in China, a structure that could complicate such a deal.
The report added that advisers were evaluating multiple structures, including setting up a standalone entity for vehicles exported from Tesla's Shanghai factory and creating separate IT systems to restrict China-based employees' access to global operations
Shanghai Remains Critical To Tesla's Global Operations
The report based on Tesla's Shanghai Gigafactory, the company's largest production facility, which accounts for more than half of its global vehicle deliveries and has an annual production capacity of over 950,000 vehicles.
The factory exports vehicles to markets including Europe, Canada and Australia, and crossed the milestone of producing four million vehicles in China in December. China is Tesla's second-largest market after the US, although competition from domestic electric vehicle makers such as BYD has intensified.
Tesla is also the first foreign automaker allowed to operate in China without a local joint-venture partner. The Shanghai plant is supported by more than 400 local suppliers, with over 95% of the components used in the Model 3 and Model Y sourced domestically.
Share Price Movement
Tesla's shares moved up 3.53% to $308.85 apiece on NASDAQ at the end of Thursday, 30 July. However, the stock has been under pressure for over a month, declining more than 26.6%.
In contrast, SpaceX shares remained muted with a marginal loss of 0.3% at the end of the previous trading session, closing at $112.2 per unit. In the past month, the stock declined over 34%.
Also Read: Tesla Reports First Cash Burn In Two Years: Q2 Profit Slides Amid High Spends Over Musk's AI Goals
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