Tesla and SpaceX, owned by Elon Musk, have been subjects of speculation about a potential merger in the market. According to reports, senior executives at Tesla have been advised to start preparing to separate their “Chinese operations,” seen as a move to pave the way for a potential merger between the two companies.
The Wall Street Journal reported on July 30th that Tesla’s advisory team has begun discussing various feasible options for the separation of their Chinese operations, including spin-offs, sales, and even the possibility of closure. However, sources emphasized that it is currently unclear how quickly Tesla will move forward with these options, and the overall plan still has variables to consider.
As of now, both Tesla and SpaceX have not made any official comments to the media regarding these reports.
Market analysts, including the JPMorgan team, have pointed out that if Tesla and SpaceX attempt to merge, they will face significant “regulatory bottlenecks.”
The core conflict lies in the stark differences in the positioning of the two companies in China:
A company holding core US military technology and having substantial physical assets and business interests in China would undoubtedly trigger rigorous scrutiny from the US national security sector. Therefore, cutting off Chinese operations is considered a necessary compromise to eliminate merger obstacles.
In June of this year, SpaceX completed its record-breaking IPO with a valuation of $750 billion, reaching a market capitalization of $1.48 trillion in its first month of trading; while Tesla’s current market value stands at around $1.22 trillion.
In fact, Musk has not ruled out the possibility of this potential century-long merger. During Tesla’s second-quarter earnings call earlier this month, when asked about the possibility of a merger, Musk responded that the two companies have increasingly overlapped and collaborated in many areas (such as the Terafab project). However, he also emphasized at the time, “Obviously, you can’t really talk about merging companies on an earnings call… that has to go through the proper process.”
Furthermore, SpaceX President and COO Gwynne Shotwell mentioned in an interview with CNBC in June that integrating the two companies “might make Musk’s life a little bit easier,” simplifying the management challenges across the companies.