Elon Musk dismisses reports on Tesla weighing sale of China business

Tesla CEO Elon Musk on Friday dismissed reports on weighing sale of China business to pave way for a potential merger with SpaceX, calling it 'fake news', as reported by Reuters.

Tesla executives have been told to prepare for a separation of its China business ahead of a potential merger with ​SpaceX, person familiar with the talks told Wall Street Journal.

Also read: Tesla weighs sale of China business to pave way for potential SpaceX merger: Report


Tesla advisers have discussed possible options ‌for a separation of China business, including ⁠a ⁠spin off, sale or closure, the WSJ report said, adding that it was unclear how quickly Tesla could move on the China business and that the plans ​could change.

The report highlighted that CEO Musk had in recent years instructed Tesla executives to organize the company with a "laser" between its US and China businesses. The move is aimed to ensure that in the event of geopolitical strife between the two countries, at least the US part of Tesla would survive, the Journal said, citing sources.

Tesla's Chinese auto business is not structured as a joint venture with a local partner. Its Gigafactory Shanghai remains its largest and most productive plant globally, serving as ⁠its key ‌export hub for Europe and the Asia-Pacific region.

The China facility historically accounts for more than half of ​Tesla's global deliveries, with ​an annual production capacity of more than 950,000 vehicles.

China is Tesla's second-largest market globally after the United States, though it faces intense pressure from local players such as BYD with the Giga Shanghai acting as a vital export pipeline for the US-based carmaker.

Tesla executives have also discussed creating a separate sales entity to handle exports from the Shanghai plant, the Journal said, adding that Tesla could create separate office systems and bar China-based employees’ direct access to other company units.

Tesla-SpaceX merger

Musk has opened avenues to the EV maker merging with his other trillion-dollar-plus-valued firm SpaceX, as he declined to dismiss the ‌possibility and citing growing overlap between the companies.

SpaceX President and Chief Operating Officer Gwynne Shotwell had also acknowledged potential benefits, telling CNBC in June that folding the companies together "might make Elon's life a little ​easier" by streamlining management ​across his businesses.

Tesla achieved the lowest costs to manufacture its Model 3 and Model Y ​with the help of more than 400 domestic suppliers through its China entity, a Tesla China executive has previously said, adding that more than 60 of them also supply Tesla globally.

Deliveries of China-made Model 3 and Model Y vehicles rose 24.4% year-over-year in June, while Musk-owned business reported that second-quarter sales and exports from the Shanghai factory rose by 32.8%.

Tesla has admitted earlier that it sources locally more than 95% of the components in the China-made Model 3 and the refreshed version of the Model Y.