Tesla May Spin Off Its China Business as Musk Weighs Risk of Taiwan Conflict

Tesla's leadership is reportedly considering separating the company's Chinese operations from its American business — an option that could ultimately lead to a sale or a complete exit from the Chinese market. The news comes from a business publication citing sources familiar with the matter.

According to the report, Elon Musk has long sought to keep Tesla's American and Chinese operations as separate as possible, so that the US division could function independently even if relations between Washington and Beijing were to deteriorate sharply. The main concern is a potential escalation over Taiwan, which could disrupt supplies of critical components such as semiconductors and battery parts.

Company executives are said to be weighing several possible paths forward: spinning off the Chinese business into a separate entity, selling it outright, or exiting the market altogether. It remains unclear how quickly any of these scenarios could be carried out, or whether the plans might change further down the line.

Splitting off the Chinese division would have a major impact on the company's overall valuation. Chinese manufacturing has played a decisive role in turning Tesla into a profitable global electric vehicle maker. China is Tesla's second-largest market after the US, accounting for roughly 18% of the company's total revenue in the first half of this year.

Tesla operates two large factories in Shanghai that produce electric vehicles and batteries. Output from these plants is aimed primarily at the Chinese market but is also exported to numerous countries worldwide — with the notable exception of the US, which Tesla supplies exclusively from its own American plants.

Talk of a possible business split comes amid growing speculation about closer ties between Tesla and SpaceX. In recent months, Musk has repeatedly spoken about deepening cooperation between the two companies in artificial intelligence, and investors have started seriously discussing a potential merger of the two structures following SpaceX's record-breaking share sale in June, which valued the company at $86 billion (roughly 1.8 trillion crowns).

"Obviously, we can't discuss mergers and things like that on earnings calls," Musk told investors last week. "That has to be done in the appropriate way."

However, Tesla's extensive presence in China could pose a significant obstacle to any such combination. SpaceX is a major US government contractor, involved in launching classified satellites and providing internet connectivity in crisis zones: in 2025, US government contracts accounted for 20.9% of the company's total revenue.

Given this, Beijing could subject any potential merger to intense scrutiny — Chinese authorities are wary both of giving an American defense contractor access to technology and supply chains within China, and of the risk of data leaks affecting roughly two million Chinese owners of Tesla vehicles. Spinning off the Chinese business could serve as a kind of protective buffer between SpaceX's sensitive operations and Tesla's manufacturing base in Shanghai.

Source: novinky.cz