Musk Calls It “Absurdly Fake News,” But Signs Suggest That Tesla Execs Are Already Preparing To Walk Away From China

Tesla's stock surged by around 8% on July 29 after Elon Musk dismissed reports of plans to separate the company's China operations. However, shares have since fallen 25% year-to-date, leaving the company's market capitalization at approximately $1.34 trillion. Tesla's China unit operates independently with its own servers, software stack and even collaborative work with Baidu engineers.

Gigafactory Shanghai, located in the heart of China, produces over half of all Teslas sold globally, with annual capacity surpassing 950,000 vehicles. This makes separation a costly endeavor.

Elon Musk downplayed rumors of a potential split during a X post, calling the information "absurdly fake news." The denial from Musk is on record, but there are indications that Tesla executives have been preparing contingency plans. According to a Wall Street Journal report, Tesla executives were reportedly instructed to draft options for separating the China unit, which could involve spinning it off, selling it, or shutting it down entirely.

This planning stemmed from potential mergers between Tesla and SpaceX, with Musk reportedly open to the idea. However, the specifics of such a plan remain unconfirmed.