Could Tesla concede China business despite Musk's 'absurdly fake news' dismissal?

Elon Musk has dismissed a Wall Street Journal (WSJ) report that stated that Tesla (NASDAQ: TSLA) is weighing a sale, spinoff or closure of its China operations ahead of a possible SpaceX merger, calling it “absurdly fake news” on X on Friday.

The denial comes as US technology firms from Nvidia to Tesla face renewed questions about how deeply they can stay planted in the world’s second-largest economy.

Nvidia (NASDAQ: NVDA) spent years defending its access to Chinese buyers before Washington’s export rules boxed it in, and its CEO was in the US capital this week to plead the case.

Now, it is Musk swatting down rumors that his carmaker is the next American giant looking for the exit.

What does Nvidia’s Washington visit show?

Nvidia CEO Jensen Huang spent the week meeting lawmakers and administration officials in Washington. He reportedly met Commerce Secretary Howard Lutnick on Tuesday, July 28.

US export controls already keep Nvidia’s most advanced processors out of China, and the trip came after senior Trump administration officials accused Beijing start-up Moonshot AI of training its Kimi K3 model on export-controlled Nvidia chips routed through Thailand.

With the administration signaling that it may soon ban foreign open-weight AI models, especially those from China, Huang made what was his first post on X on July 24, sharing a letter highlighting why open models matter.

A few days later, Huang has a meeting with the Trump administration, a meeting an Nvidia spokesperson says was to discuss the company’s plan to produce $500 billion in American technology over four years and US leadership in AI.

What did the WSJ actually report about Tesla?

Citing unidentified sources, the Wall Street Journal said Tesla advisers have discussed separating the carmaker’s China arm from its global business, with options running from a sale to a full shutdown of the Shanghai Gigafactory.

Some executives were reportedly told to be ready for a separation.

Musk pushed back within hours of the report. “This has never even come up in a discussion ever,” he wrote. “Absurdly fake news. People should assume news is fake until proven otherwise.”

Why unwinding Shanghai would not be simple

Shanghai is Tesla’s single largest plant, and it reportedly built 52% of the vehicles the company delivered worldwide in 2025. Also, China is Tesla’s second-biggest market after the US, and any sale would need a green light from Chinese regulators before it could go through.

The company’s footing there has slipped as sales have been falling amid a price war and pressure from other EV makers, led by BYD. Xiaomi, this week, priced its new SkyNomad SUVs 23% under Tesla’s Shanghai-built Model Y L.

Musk has held on to full ownership of the Shanghai factory, an arrangement most foreign rivals never got, as they were pushed into joint ventures with domestic partners.

Is the recent SpaceX merger behind the Tesla split rumor?

Musk holds roughly a 20% voting stake in Tesla and full control of SpaceX. The Journal reported that he wanted to restructure Tesla to defuse conflicts tied to SpaceX’s status as a major US defense contractor, a sensitivity heightened by US-China tensions.

Tesla has also reportedly been preparing for a possible conflict over Taiwan, with the aim of being ready for a split by 2027. The money involved is not small: Tesla shares are down about 29% this year, leaving it valued just under $1 trillion, while SpaceX, worth around $1.5 trillion, has fallen roughly a third since its June listing.

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