Tesla’s China footprint complicates potential SpaceX merger

Elon Musk says he has no plans to merge Tesla and SpaceX. Investors keep speculating anyway. And now the biggest obstacle to any hypothetical deal has come into sharper focus: Tesla’s deep roots in China. Here’s the problem in plain terms. SpaceX makes a significant chunk of its money from the US government, including defense and intelligence contracts. Tesla operates one of its most important factories in China, a country the US government increasingly treats as a strategic adversary. A merger would be like asking the Pentagon to share a corporate umbrella with a business that depends on Beijing’s goodwill. The national security reviewers would have a field day. The China problem, explained Tesla’s Gigafactory Shanghai is not some minor outpost. China is Tesla’s second-largest market, a critical manufacturing hub that produces vehicles for both domestic sale and export. SpaceX, meanwhile, expects roughly 20% of its 2025 revenue to come from US federal agencies. That includes contracts with the Department of Defense and intelligence community. A merger would effectively create a single corporate entity that simultaneously depends on Chinese government cooperation and US national se...