Tesla-SpaceX Merger Could Face The Biggest Regulatory Risk In China, BofA Warns

• The merger could raise national security concerns and complicate regulatory approval in China, BofA said.
• The Shanghai factory has an installed annual production capacity exceeding 950,000 vehicles annually.
• BofA said a potential merger would involve SpaceX acquiring the EV maker through an all-stock deal.

A potential merger between Tesla (TSLA) and SpaceX (SPCX) could face its biggest regulatory challenge in China, Bank of America reportedly said on Friday, citing Tesla’s dependence on its Shanghai factory and SpaceX’s ties to the U.S. defense industry.

SPCX shares were down more than 5% at the time of writing, while TSLA stock fell 1.8%.

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Why Is China A Major Concern?

According to Investing.com, BofA said Tesla’s Shanghai plant, which accounts for roughly half its global vehicle production for both domestic and overseas markets, would come under the ownership of a major U.S. defense contractor if the companies merged.

That could raise national security concerns and complicate regulatory approval in China. According to Tesla, the Shanghai factory has an installed annual production capacity exceeding 950,000 vehicles annually.

In an interview with CNBC last week, former Tesla board member Steve Westly highlighted similar concerns over the merger, citing regulatory challenges and national security risks.

What Would A Potential Merger Look Like?

BofA said a potential merger would involve SpaceX acquiring the EV maker through an all-stock deal. “The key question, in our view, is whether TSLA’s special committee can negotiate a premium, which we think is likely given Tesla’s core auto momentum and robotaxi inflection,” BofA reportedly said.

The firm maintained its ‘Buy’ rating and $460 price target on Tesla.

Earlier this month, Musk confirmed that both companies had formed independent committees to explore a merger, but emphasized that a deal remains uncertain.

Retail Remains Bearish On TSLA, SPCX

Retail sentiment surrounding both TSLA and SPCX on Stocktwits trended in the ‘bearish’ zone over the past 24 hours.

One user believes Tesla’s high valuation will not hold, with a deal likely to value Tesla much lower.

TSLA shares are down 9% so far in 2026 while a sharp sell-off this month has brought SPCX stock close to its IPO price of $135.

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