Tesla-SpaceX merger faces China regulatory hurdles

Elon Musk's proposed Tesla-SpaceX merger faces significant regulatory hurdles in both the US and China due to national security concerns, stemming from SpaceX's sensitive defense contracts and Tesla's heavy reliance on Chinese manufacturing and data. Tesla's China operations, including driver data collection and Shanghai production exceeding 50% of global output, would require strict firewalls to prevent information flow to SpaceX. Analysts suggest options like self-contained Chinese units, divestment, or concessions, though China may leverage approval for strategic technology access or manufacturing commitments. A clean break from China is difficult due to deeply integrated suppliers, but some investors believe Tesla could scale back Chinese production if regulators object, viewing it as a digestible short-term cost. China's bargaining power remains strong given Tesla's current financial dependence on its EV operations there.