A possible merger between Elon Musk’s rocket company SpaceX and carmaker Tesla may face bigger obstacles from politics than from regulation, drawing scrutiny in Beijing and potentially igniting a battle between US President Donald Trump and the Democrats.
The deal, under review by committees at both companies, is a step toward what could become the largest merger in history and create a company worth about $3.5 trillion, reports Reuters.
Analysts said a merger would unite one of the US government’s most important aerospace and defence contractors with one of the most China-exposed major American manufacturers, raising national security questions in Washington and Beijing. While the concerns are unlikely to derail a deal, they would likely leave the combined company exposed to years of political wrangling.
For Beijing, a merger would place Tesla’s Shanghai manufacturing hub under the same corporate umbrella as SpaceX, a company deeply embedded in US military activities. “A formal merger would make it harder for Chinese authorities to treat Tesla as a purely commercial actor, raising risks for future factory expansions, data approvals, or market access,” said Bruegel senior research fellow Alicia Garcia-Herrero.
Democrats immediately raised concerns ahead of the November 3 midterms. US Senator Cory Booker, a New Jersey Democrat, said, “When one person controls the infrastructure that governments and militaries depend on, his business decisions become national security decisions, too.”
The greater threat may come later if a future administration takes a harder line. American Enterprise Institute senior fellow Derek Scissors said the next administration could begin to scrutinise a merged entity. “This may be the biggest risk to a deal- that it could get unwound in 2029,” he said.
Globally, antitrust experts see limited competition concerns as the companies operate in separate markets. However, foreign regulators, particularly in markets with powerful domestic auto industries like China and South Korea, could examine whether Tesla’s access to SpaceX technologies creates unfair barriers. A South Korean antitrust official told Reuters the merger could require an in-depth review.
