Elon Musk explores merger between Tesla and SpaceX, valuing combined entity at $3.5 trillion

Merger evaluation under way

Elon Musk has confirmed that a merger between Tesla and SpaceX is under active consideration, with special committees formed in both companies to evaluate the transaction. According to BBC News, these committees comprise independent directors and have begun discussions, though no agreement has been reached. Musk, who serves as CEO of both companies, has recused himself from the committees due to his conflicting roles.

Valuation and shareholder hurdles

A combined Tesla and SpaceX would be valued at approximately $3.5 trillion, with Tesla currently worth $1.5 trillion and SpaceX $2 trillion. However, the merger would require approval from at least 50% of Tesla’s shareholders, a threshold Musk described as a "quite a high hurdle." Mint reports that Musk owns around 20% of Tesla and 45% of SpaceX, with 82% voting control in SpaceX.

Tesla’s shares rose 2% in after-hours trading following Musk’s remarks, while SpaceX’s shares surged 8%. Analysts cite the complementary technologies of both companies—such as Tesla’s self-driving systems and SpaceX’s satellite network—as a potential driver for shareholder support, though the outcome remains uncertain.

Strategic rationale and risks

Musk has suggested that integrating Tesla and SpaceX could accelerate advancements in AI, chip manufacturing, and robotics. For instance, Terafab, a joint venture between the two companies, aims to produce its first test chip by mid-2025 and reach volume production by Q3 2028. SpaceX’s cloud compute business, which generated $7.5 billion in revenue, is another attractive asset for Tesla shareholders.

However, the merger faces significant challenges. SpaceX’s Starlink and Starshield businesses are under scrutiny due to claims of restricted access for Ukraine, which could attract regulatory attention. Additionally, Tesla’s reliance on China for 20% of its revenue complicates the deal, as SpaceX’s defense contracts and satellite operations are banned in China. Analysts suggest structural solutions, such as transferring Tesla’s China operations to a consortium of Chinese companies, but these remain speculative.

Timeline and political considerations

Gizmodo reports that sources close to the discussions claim the merger must close before the end of Donald Trump’s presidential term, citing regulatory and market concerns. There is reportedly a push to announce the deal by the first half of 2027, though the committees have not agreed on transaction terms and may never do so.

The potential merger could face heightened regulatory scrutiny, particularly if Democrats gain influence in the upcoming US midterm elections. Musk’s growing voting control over the combined entity—reportedly higher than his current stake in Tesla—may also raise governance concerns among shareholders.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

For founders and operators, this potential merger signals a dramatic shift in the technology, automotive, and aerospace landscapes. If approved, the combined entity would create a vertically integrated powerhouse spanning AI infrastructure, satellite communications, cloud computing, and chip manufacturing. This could redefine competition in these sectors, forcing rivals to reassess their strategies to counter the merged company’s scale and capabilities.