Tesla Weighs China Business Separation Amid SpaceX Merger Speculation

Tesla Inc. (NASDAQ: TSLA) has reportedly explored the possibility of separating its China operations as CEO Elon Musk continues to evaluate a broader corporate restructuring that could eventually involve SpaceX, according to a Wall Street Journal report published Thursday.

The report said some Tesla executives were instructed to prepare for a potential China business separation, while advisers discussed several strategic options, including a spinoff, sale, or even a complete shutdown of the company's operations in China. Sources familiar with the discussions cautioned that no final decision has been made, and the plans could still change.

Tesla shares climbed 2.3% in after-hours trading following the report, reflecting investor optimism over potential corporate restructuring and renewed speculation surrounding a future merger between Tesla and SpaceX.

Interest in a possible Tesla-SpaceX merger has grown since SpaceX's highly anticipated Nasdaq debut in June. During Tesla's latest earnings call, Musk acknowledged investor questions about combining his companies but emphasized that any such move would require a formal process.

"Obviously we can't talk about combining companies on earnings calls," Musk said. "It has to be done through the appropriate process."

While Musk stopped short of confirming merger plans, his comments have fueled expectations that closer integration between his businesses remains under consideration.

The reported review of Tesla's China business comes as the electric vehicle maker faces increasing geopolitical uncertainty and evolving regulatory challenges in one of its largest markets. However, it remains unclear whether a separation would be intended to simplify a future merger, reduce operational risk, or serve another strategic objective.

Musk has a history of consolidating companies within his business empire. Earlier this year, he merged artificial intelligence startup xAI into SpaceX, creating a broader aerospace and AI-focused organization. He also orchestrated Tesla's acquisition of solar energy company SolarCity in 2016, a deal that significantly expanded Tesla's clean energy portfolio.

Although discussions surrounding Tesla's China operations and a potential SpaceX merger remain preliminary, investors are closely watching for further developments that could reshape Musk's corporate empire and influence the future direction of both companies.