Former Tesla board member Steve Westly identified three primary obstacles to a potential merger between Tesla and SpaceX. Both companies currently hold valuations exceeding $1 trillion. Westly, who leads The Westly Group, suggests that special committees from both boards may attempt to expedite a deal, though CEO Elon Musk stated that no formal terms have been agreed upon.
Valuation remains a critical challenge, as it dictates the exchange ratio for shares. Musk is excluded from independent director discussions due to conflicts of interest. While Tesla secured SEC clearance on September 29 for a retail voting program to simplify shareholder approvals, Westly notes that regulatory hurdles persist.
The third major hurdle involves Tesla’s operations in China. SpaceX derives approximately 20% of its 2025 revenue from US federal agencies, creating potential national security concerns regarding Tesla’s Shanghai plant, which accounts for over half of the company's vehicle deliveries. Analysts at JPMorgan have highlighted regulatory approvals in China as a significant bottleneck.
Reports from The Wall Street Journal in July suggested that Tesla executives were advised to prepare for a separation of the China business, a claim Musk has dismissed. Westly emphasizes that Tesla needs to demonstrate growth in areas beyond automotive sales, especially as automotive revenue declined 3% year-over-year in the third quarter.
