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.
