Why Elon Musk Would Find It Hard To Decouple Tesla From China

Elon Musk has dismissed a media report claiming electric vehicle (EV) company Tesla is considering selling its China business, even as the speculation threatens to renew scrutiny over the American carmaker’s dependence on its main manufacturing hub in Shanghai.

“This has never even come up in a discussion ever,” Musk, who is CEO of both Tesla and commercial aerospace giant SpaceX, posted on his X social media account on Friday. “Absurdly fake news.”

The remarks by the world’s richest person came after the Wall Street Journal (WSJ) reported that Tesla was considering separating its China operations from its global businesses ahead of an expected merger with SpaceX, which could eventually lead to the sale or closure of its Shanghai-based Gigafactory.

The WSJ, citing unidentified sources, said Musk wanted to reorganise Tesla with a “laser” to address potential conflicts of interest arising from SpaceX’s role as a major US defence contractor amid US-China tensions.

Technically, any sale of Tesla’s operations in the world’s second-largest economy cannot be completed unless the American company receives the green light from Chinese regulators.

Analysts said Tesla’s Shanghai assembly, which accounted for 52 per cent of its total vehicles delivered to global customers in 2025, would not be easy to dispose of. China is Tesla’s second-largest market worldwide after the US.

“Given the role of its Shanghai factory and China’s strong EV supply chain, any potential plan to separate its China business will not be economically viable for Tesla,” said Gao Shen, an independent analyst in Shanghai.

“Nowadays, Tesla remains a global leader in the EV sector, although its Chinese rivals have been growing fast in both the domestic and overseas markets.”

Grace Tao, Tesla’s vice-president of external relations in China, said last year that Tesla’s Shanghai Gigafactory had more than 400 domestic suppliers, with more than 60 of them also providing components to its assemblies outside mainland China.

More than 95 per cent of all the parts in Tesla’s Shanghai-made Model 3 and Model Y vehicles were supplied by local vendors, she added.

In November, Tao posted on social media platform Weibo that Tesla would not exclude suppliers based on their country of origin as the American EV maker applied unified standards in selecting global vendors.

She appeared to make the statement in response to another WSJ report suggesting that Chinese-made parts would be omitted from the production of Tesla vehicles in the US.

In that earlier article, the US newspaper reported that Tesla planned to stop using Chinese-made components in cars assembled in the US as it sought to reduce reliance on China amid tariff uncertainty between the world’s two largest economies.