Is the Auto Industry Less Lucrative Than the Space Sector?

According to a report by The Wall Street Journal, Tesla is contemplating the sale or spin-off of its China business to facilitate a potential future merger with SpaceX.

Both Reuters and The Wall Street Journal have indicated that during an internal meeting, Musk disclosed his consideration of merging Tesla with SpaceX. Given geopolitical factors, this move might necessitate the divestiture of Tesla's China operations.

Following the implementation of this plan, Tesla's global headquarters will oversee the technological roadmap for the United States and Europe. Meanwhile, the China region will operate as a distinct entity, continuing vehicle production and sales but with diminished financial ties to Tesla's U.S. operations.

(Image credit: Tesla)

As the global frontrunner in new energy vehicles, Tesla leads the automotive sector with a market capitalization of $1.22 trillion. However, for Musk, SpaceX remains his most prized asset.

SpaceX went public on June 12 of this year, with shares priced at $135 each. At its zenith, the stock soared to $230 per share, boasting a market capitalization that once surpassed $3 trillion. Yet, this prosperity was short-lived. After peaking on June 16, SpaceX's stock price embarked on a downward trajectory.

By the close of trading on July 30, SpaceX's stock had plummeted to $112.2 per share on the U.S. stock market, with its market capitalization retracting to $1.48 trillion.

(Image credit: Screenshot from Baidu Stock Market)

A merger between SpaceX and Tesla would create a colossus on par with Apple and NVIDIA.

However, the challenge lies in the fact that selling or spinning off Tesla's China business would inflict substantial harm on the company.

The Model Y has consistently dominated the SUV sales charts in the Chinese market, while the Model 3 has also maintained a top-five position in sedan sales, generating annual revenue exceeding 100 billion yuan for Tesla.

To loosen the financial reins with Tesla's main entity, Tesla may have to relinquish control of its China business. Consequently, revenue from the Chinese market would no longer be reflected in Tesla's financial statements.

Furthermore, the success of the Model 3/Y is intricately linked to Tesla's brand endorsement. Post-spin-off, Tesla's brand value in China is likely to diminish significantly, inevitably impacting sales.

(Image credit: Photographed by Dianchetong)

Additionally, Tesla's current production capacity heavily leans on the Shanghai Gigafactory. A sale or spin-off of the China business would severely disrupt global operations.

Most crucially, which automaker is poised to acquire Tesla's China operations?

From Dianchetong's perspective (ID: dianchetong233), SAIC emerges as the most fitting candidate. Firstly, Tesla's China headquarters is situated in Shanghai, in close proximity to SAIC. Secondly, SAIC has already forged joint ventures with Volkswagen and General Motors, gaining insights into managing foreign-funded factories, global exports, and overseas supply chains.

Undoubtedly, selling or spinning off the China business would have a predominantly detrimental effect on Tesla. At present, Musk is merely exploring this option and has yet to reach a definitive decision.

Although a merger between Tesla and SpaceX would streamline subsequent endeavors such as communication and autonomous driving collaboration, unified AI chip R&D, and the integration of space and ground computing power, the loss of revenue from the China region would clearly outweigh these benefits.

On July 31, ChinaJoy 2026, themed "Exploring with AI," commenced with great fanfare.

A total of 900 pan-entertainment exhibitors, including Tencent, NetEase, Sony, Qualcomm, MC, and Qingxian, collectively presented a grand spectacle for the global entertainment industry.

With the support of AI, how will hard tech brands such as terminals, peripherals, robots, displays, and chips intersect with the game content industry to deliver novel entertainment experiences?

Under the leadership of founder and editor-in-chief Luo Chao, the Leikeji ChinaJoy 2026 reporting team is poised to descend upon Shanghai to deliver comprehensive coverage. Stay tuned.

Tesla, new energy vehicle, Model Y, Musk

Source: Leikeji

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