Interpretation: Why does Musk want to merge SpaceX and Tesla?

Joe Brock

Reuters, October 21 - Elon Musk thinks that merging Tesla and SpaceX is a good idea (link), and he publicly supported this proposal on Tuesday—a move that would create a company with an estimated market value of about $3.5 trillion, making it one of the most valuable companies in the world.

Although electric car maker Tesla and rocket company SpaceX have long been viewed as fundamentally independent businesses, the distinction is becoming increasingly blurred as Musk expands his operations into artificial intelligence, robotics, advanced manufacturing, satellite communications, and computing infrastructure—including data centers on Earth and possibly in orbit in the future.

A potential merger could mean the following:

Why would Musk do this?

Such a merger would create an enterprise at the core of Musk’s long-term vision: a technological and manufacturing empire whose business spans artificial intelligence, energy, robotics, communications, and transportation both on Earth and in space.

“I really do think there would be great benefits in merging these companies, because we are basically already at the superintelligence singularity, and collaborating on superintelligent software development, chip design, Terafab (obviously), robotics, deploying massive devices into orbit with the Starmind constellation (, orbital data centers) and connectivity, would yield huge benefits,” Musk said on Tuesday.

Merging the two companies would also streamline decision-making processes. Many of Musk’s projects already span multiple companies, requiring approvals from each company's board of directors and shareholders. The merged company would give management greater freedom, enabling them to deploy capital, engineering talent, and infrastructure to the areas with the greatest growth potential.

Musk has long argued that in order to advance Tesla’s AI and robotics strategy, he needs to have greater influence over Tesla. He owns nearly a fifth of Tesla and holds voting control at SpaceX. A merger would further solidify his influence.

What does this mean for investors?

Tesla shareholders would gain exposure to SpaceX’s rapidly growing Starlink broadband business, launch services, and future space projects. SpaceX investors would gain ownership of Tesla’s automotive, energy storage, autonomous driving, and robotics businesses.

The merged company could also become one of the most valuable companies in the world, with a market value of around $3.5 trillion, holding leading positions in automobiles, robotics, satellite communication, launch services, energy storage, and AI infrastructure.

Supporters might argue that the combined company could allocate capital more efficiently across increasingly interdependent business areas.

However, critics say investors would face broader technological, regulatory, and execution risks, some of which are barely related to each other.

Which areas could SpaceX and Tesla cooperate in?

Starlink satellites could provide communications connectivity for Tesla’s robotaxi, autonomous driving systems, and the next-generation Optimus humanoid robot. Tesla’s battery and energy storage products could help meet SpaceX’s growing electricity needs, including for future data center projects.

Musk has already announced a major collaboration between Tesla and SpaceX—Terafab (link)—a semiconductor and AI computing project aimed at producing advanced chips for Tesla’s self-driving vehicles and Optimus robots, while also meeting SpaceX’s ambitions in AI and data centers. Musk hopes the project will start mass production by the end of 2028.

Tesla’s expertise in large-scale factory automation could complement SpaceX’s efforts to mass-produce Starship; while SpaceX technology has been used in Tesla’s products, most notably plans to use rocket-derived components in the next-generation Roadster sports car.

The combined company could also coordinate efforts to secure strategic supply chains, leveraging Tesla’s scale in batteries, semiconductors, and manufacturing equipment with SpaceX’s demand for specialty metals, electronic components, propulsion parts, and satellite hardware.

What are the downside risks?

The biggest challenges may be geopolitical and regulatory issues.

SpaceX is a major contractor for the US military, intelligence agencies, and NASA. At the same time, Tesla maintains close ties with China through its Shanghai factory—a crucial facility for car production and sales. This combination could invite stricter scrutiny from US regulators, national security officials, and possibly from Beijing.

The merger would also face hurdles regarding shareholders and corporate governance. Investors would have to be convinced that merging two already complex businesses creates more value than keeping them independent. Concerns over conflicts of interest, voting control, and allocation of capital would inevitably arise.

There is also execution risk. Starship, robotaxis, humanoid robots, AI data centers, mobile communications, and orbital infrastructure are all costly and technologically challenging projects. Merging Tesla with SpaceX would not reduce these risks; it would merely concentrate them under one roof.

(To facilitate non-English speakers, Reuters provides an automated translation of its reports into several other languages. Because automated translation may contain errors or omit contextual nuances, Reuters does not guarantee the accuracy of the translation and provides it only for reader convenience. Reuters assumes no responsibility for any damages or losses arising from the use of the automated translation function.)