According to the article, Chinese regulators may be the toughest hurdle to clear in a Tesla-SpaceX deal.
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TSLAmergers and acquisitionsSpaceXregulationChina
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Related tickers and likely impact
TSLA
▼ Likely negativeTesla, Inc.
Relevance: medium
| Market | US stocks |
|---|---|
| Sector | Consumer Discretionary |
| Industry | Automobile Manufacturers |
| Market cap | $1.5T |
| Close on 10/29/2026 | 403.29 |
| Change that session | -0.23% |
Impact is scored by AI from the headline and may be wrong. It is not investment advice.
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- Why Beijing could block the SpaceX-Tesla merger
Bank of America says China is the main regulatory risk to a potential Tesla–SpaceX combination, since Tesla's Shanghai plant, which builds about half its global output, would fall under a major U.S. defense contractor. Although special committees have been formed and terms are not agreed, BofA views a deal as incremental upside for Tesla shareholders; a logical structure would be an all-stock acquisition of Tesla by SpaceX, and a 20% to 30% premium would still leave Musk with over 50% of voting power. The strategic case centers on Terafab, the companies' joint chip effort, whose long-term costs Musk expects to exceed $100 billion, and SpaceX has bought $626 million of Tesla Megapacks so far this year. BofA maintained its Buy rating and $460 price target on Tesla, expecting robotaxis to become a meaningful earnings driver by the end of 2027.
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The article says Chinese regulators may be the toughest hurdle to clear in a possible Tesla-SpaceX deal.
- What Is the Biggest Obstacle to a SpaceX-Tesla Merger? JPMorgan Points to China
JPMorgan analyst Rajat Gupta says obtaining Chinese regulatory approval could be a bigger hurdle than Tesla shareholder support for a possible Tesla–SpaceX merger, though no deal has been announced. China accounts for about 20% of Tesla's revenue and a larger share of its EBIT and free cash flow, and Gupta estimates Chinese operations at about 10% of JPMorgan's $1.7 trillion sum-of-the-parts valuation. The bank's scenario assumes a 30%–35% premium over Tesla's market cap and a merger of equals in which Musk keeps over 50% voting control, with his voting stake rising to about 20% after he exercised his 2018 award in June 2026. Gupta cites shared engineering, AI, and commercial ties, including Tesla's $2 billion investment in xAI, and values SpaceX at about $2 trillion, which could support an all-stock deal. He also notes that Starlink is not authorised to operate in China and that SpaceX's US defence contracts could complicate regulatory review.
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The article argues that now is not the best time for Tesla (TSLA) to merge with Space Exploration Technologies (SPCX), although the terms of any deal are unknown. The first point is that the trend in recent years has been to break up diversified industrial conglomerates, which often trade at a conglomerate discount, while investors increasingly value targeted investment. The main argument concerns differing risk and capital profiles: Tesla is on the cusp of scaling robotaxi/Cybercab and later Optimus, while SpaceX operates in a high-risk sector that needs massive capital spending, and high depreciation is likely for orbital data centers that are hard to service. Starlink is currently SpaceX's profit generator and is effectively funding its Super Intelligence business. The article adds that in a merger, Tesla shareholders would dilute their claim on cash flows from robotaxi, EVs and robotics.
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Morningstar says a Tesla-SpaceX merger 'does make strategic sense,' but SpaceX would need growth nearly double what the firm currently models to justify its share price. Morningstar raised its SpaceX fair value estimate to $70 from $62, yet that still implies about 51% downside from current levels, even though its forecasts already assume revenue of $41 billion in 2026 and $228 billion by 2030. The Terafab chip project could cost tens of billions of dollars through early 2028 and more than $100 billion longer term, but the funding split between the two companies remains unresolved. Musk said his conflicts keep him out of the independent committees' talks and warned against treating a deal as certain.
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Tesla shares rose 13% over the past month after a third-quarter delivery beat (486,532 vehicles), a Barclays upgrade with a $450 target, and talk of an all-stock merger with SpaceX, though no terms have been set. Tesla's third-quarter revenue was flat at $28.05 billion, and GAAP net income fell to $787 million from $1.37 billion. The stock trades at 190x forward earnings against a five-year average of 108x, and consensus earnings through 2028 remain below Tesla's 2022 level. The author's view is that adding shares is not warranted here and trimming makes more sense until the merger has defined terms, with the Dallas Cybercab launch in November as the next marker.
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