Tesla's Gigafactory in Lingang, Shanghai Photo: VCG

In response to some Western media reports claiming that Tesla is considering selling its China business to pave the way for a potential SpaceX merger, Tesla China clarified with the Global Times on Friday that this is fake news. On the same day, Tesla China rolled out a software update for Model 3, Model Y, Model S and Model X vehicles, integrating Chinese large language model Doubao as an intelligent voice assistant.

Tesla executives have been told to prepare for a separation of its China business ahead of a potential merger with SpaceX, The Wall Street Journal reported.

Reuters said that a merger between Elon Musk's Tesla and SpaceX would raise geopolitical and regulatory hurdles, because SpaceX is a major US defense contractor involved in national security and satellite programs, while Tesla operates wholly owned manufacturing facilities in China.

Musk said "fake news" on his X social media account in response to the report. Tesla China also said those media reports are fake news when reached by the Global Times for comment on Friday.

"I'm not aware of the specific situation you mentioned. As a matter of principle, we consistently oppose overstretching the concept of national security and discriminatory actions targeting China," Chinese Foreign Ministry spokesperson Mao Ning said on Friday, in response to a question over media reports claiming that Tesla is preparing for a separation of its China business ahead of a potential merger with SpaceX.

It's worth noting that instead of selling its China business, the US electric vehicle (EV) giant is deepening its presence in the Chinese market, the world's largest auto market.

On Thursday, Tesla announced that its 10 millionth EV rolled off the production line at the Fremont Factory, making Tesla the first company in the world to reach a cumulative production milestone of 10 million EVs.

Of these, nearly half of Tesla's electric vehicles are manufactured in Shanghai. Since December 2019, the Shanghai factory has produced over 4.5 million EVs in six and a half years, accounting for more than 45 percent of Tesla's total global output, and stands as Tesla's largest export hub worldwide, official data showed. In addition to supplying the Chinese market, vehicles produced at the Shanghai factory are also exported to the Asia-Pacific region and Europe.

Meanwhile, Tesla China unveiled a fresh software update on Friday for its local lineup, encompassing the Model 3, Model Y, Model S, and Model X. Notably, this marks the automaker's inaugural effort to integrate a third-party large language model - ByteDance's Doubao - into its Chinese fleet as an AI-driven voice companion.

Promoted as a tool for delivering real-time information and carrying out natural and fluent dialogue, the system boasts a variety of high-end vocal profiles and customizable personas, such as "Know-It-All," "Music Lover" and "Storyteller." Access to this functionality requires a valid Premium Connectivity subscription.

"Tesla's operations in China serve as a cornerstone for the US company, contributing significantly to the steady growth of its revenue while generating substantial profits. Its China business acts as a crucial buffer against Tesla's sluggish sales in markets like Europe. Consequently, it is absolutely implausible for Tesla to divest its Chinese business," Cui Dongshu, secretary-general of the China Passenger Car Association, told the Global Times on Friday.

China has become a global core production base and the second-largest consumer market for Tesla, and therefore any divestment would profoundly impact its global supply chain layout, Cui said.

China is Tesla's second-largest market after the US, and the company has now established a complete closed-loop business operation in China. In addition to the Shanghai gigafactory and the energy storage megafactory, Tesla has also built a nationwide direct sales, delivery, and after-sales service network, operated large-scale supercharger infrastructure, and established a localized automotive R&D center.

On June 22, Tesla China participated in the fourth China International Supply Chain Expo (CISCE) in Beijing. At this year's expo, Tesla highlighted China's robust manufacturing capabilities behind its global models, focusing on the high-efficiency mass production at the Shanghai factory, the synergy of its localized supply chain, the global export footprint of its energy storage products, and its sustainable practices in green manufacturing.