BofA: China Is the Biggest Regulatory Risk to a Tesla–SpaceX Merger

Bank of America warned on October 30 that a potential Tesla–SpaceX merger could face its biggest regulatory challenge in China, citing Tesla’s dependence on its Shanghai factory and SpaceX’s ties to the U.S. defense industry. According to the bank’s analysis, reported by Investing.com, a merger would involve SpaceX acquiring Tesla through an all-stock deal, and Tesla’s Shanghai plant — with installed annual capacity exceeding 950,000 vehicles and accounting for roughly half of Tesla’s global production for domestic and overseas markets — would come under the ownership of a major U.S. defense contractor.

That combination, BofA argued, could raise national-security concerns and complicate regulatory approval in China. Former Tesla board member Steve Westly raised similar concerns in a CNBC interview the previous week. The warning landed the same week Elon Musk confirmed that independent committees at both companies are exploring a merger, while stressing that no terms have been agreed and no deal is certain. BofA maintained its Buy rating and $460 price target on Tesla even while flagging the China risk.

The market reaction was cautious: Tesla shares fell about 1.8% and SpaceX shares fell more than 5% at the time of the report, with retail sentiment on both stocks trending bearish. Tesla shares are down about 9% so far in 2026, while a sharp October sell-off has brought SpaceX close to its $135 IPO price. The China angle reframes the merger debate: the question is no longer only whether Tesla and SpaceX shareholders want a $3.5 trillion combination, but whether Beijing would let the Shanghai Gigafactory change hands to a defense-linked owner at all.