Musk backs possible Tesla–SpaceX merger as committees examine deal

Elon Musk has backed a possible merger between Tesla and SpaceX, saying both companies have formed special committees to examine a combination, although no transaction terms have been agreed.

Speaking during SpaceX’s quarterly results call on Tuesday, 20 October, Musk said a deal could bring together overlapping work in chips, artificial intelligence and software. The BBC reported his comments.

“Do I think it would be a good idea? Yes,” he said, while warning investors not to assume a merger would happen.

With Tesla valued at roughly $1.5 trillion and SpaceX at about $2 trillion, a combination would rank among the largest corporate mergers in history. Those market valuations, however, are not agreed deal values.

No agreement on terms

Musk said he was not serving on either special committee because his role as chief executive of both businesses made him a “conflicted party”. He compared discussing the potential transaction to “tap dancing through a minefield”.

“The special committees have not reached agreement on terms of any transaction and there’s no guarantee that they will,” he said.

Shareholders would ultimately decide whether a merger proceeded. Musk said approval from at least 50% of Tesla’s shareholders would be needed, describing that as “quite a high hurdle to achieve”.

The distinction matters for investors: the companies are examining a possible combination, rather than announcing an agreed merger. No transaction price, exchange ratio or completion timetable was established in Musk’s reported remarks.

AI and chips underpin the case

The potential deal reflects a growing overlap between businesses best known for electric vehicles and space launches. Tesla has increasingly directed resources towards robotics, while SpaceX has expanded into AI computing infrastructure alongside its rocket and satellite operations.

The companies already collaborate through Terafab, a joint chip-manufacturing initiative. Musk said their work on semiconductors, AI and software provided reasons to consider a full merger.

There is also a precedent for consolidation within his businesses. Before its stock market debut in June, SpaceX acquired xAI and X, the social media platform formerly known as Twitter.

SpaceX’s latest results illustrate the scale of its computing expansion. Revenue from providing cloud computing capacity to technology companies, including Anthropic and Google, reached $7.5 billion in the three months to 30 September, compared with $813 million a year earlier. Starlink revenue rose to $5.2 billion from $3 billion over the same period.

Across the first nine months of the year, SpaceX’s revenue increased to $27 billion from $13.7 billion. It nevertheless recorded a $1.1 billion loss for that period, despite reporting a $4.4 billion profit in the latest quarter.

China presents another potential hurdle

Beyond shareholder approval, JPMorgan analyst Rajat Gupta identified Chinese regulatory clearance as a potentially larger obstacle, according to an Investing.com report carried by Yahoo Finance.

Gupta’s assessment pointed to Tesla’s substantial manufacturing operations in Shanghai and SpaceX’s close ties to US defence contracts. The note said China accounts for roughly 20% of Tesla’s revenue.

JPMorgan suggested that separating Tesla’s Chinese business, or transferring majority control to a China-based consortium while retaining licensing income, could offer one possible structure. That is an analyst’s proposal, not an arrangement announced by either company.

Investors initially welcomed the merger discussion: SpaceX shares rose 8% and Tesla shares gained 2% in after-hours trading following Musk’s comments. Whether that enthusiasm produces a transaction now depends on the committees reaching terms and securing the necessary approvals.