Musk Calls WSJ Report on Tesla China Sale Plans ‘Absurd Fake News’

WSJ Reports Tesla Considered Separating China Business Ahead of Possible Merger

Musk Says on X It ‘Was Never Even Discussed’

Tesla considered selling its China business as part of contingency planning for a possible merger with SpaceX, according to a Wall Street Journal report. Elon Musk, the chief executive officer of Tesla and SpaceX, swiftly rejected the report as “absurd fake news.”

The Wall Street Journal reported on July 30, citing people familiar with the matter, that some Tesla executives were instructed to prepare for a separation of the company’s China operations if a merger were to proceed. Tesla advisers discussed several options, including a spinoff, a sale and a withdrawal from the business.

Tesla operates two large factories in Shanghai. One person said executives also discussed setting up a separate sales entity to handle exports produced at the Shanghai plants.

The Journal reported that Musk had structured Tesla’s China operations so they could be separated easily from its US business, given geopolitical tensions between the US and China. The aim, it said, was to help preserve the US business even if tensions between the two countries intensify.

How quickly Tesla could actually spin off or sell the China business remains unclear. The people said the plans could still change.

Musk directly denied the report. In a post on X, he wrote, “It was never even discussed,” adding that it was “absurd fake news.”

A possible merger between Tesla and recently listed SpaceX has been a recurring subject of market speculation. In recent months, Musk has also emphasized potential synergies as he reorganized the two companies around artificial intelligence projects.

The Journal said SpaceX’s status as a major US defense contractor was one reason Tesla may be considering a separation of its China business. Carving out the China unit could reduce potential conflict-of-interest concerns that might arise in a future merger.

A merger between the two companies would also face potential scrutiny from Chinese authorities. If a US defense contractor were to control Tesla’s factories in China, concerns could be raised that the plants’ know-how and supply chains might be used for US military purposes.

Chinese authorities could also be sensitive to the possibility that data from about 2 million Tesla vehicles in China could end up in the hands of a US defense company.

China is Tesla’s second-largest market after the US. In the first half of this year, revenue from China accounted for about 18% of the company’s total revenue.

Shin Hyun-bo, Hankyung.com reporter greaterfool@hankyung.com