A Mega-Merger Made in Musk's Image

Elon Musk has spent years building Tesla and SpaceX into trillion-dollar technology empires. Now he wants to bring them together. Asked on Tuesday whether a merger would be a good idea, his answer was unambiguous: yes. Special committees have been formed to assess a potential deal, he said, though he stressed that nothing had been agreed and that a merger was not guaranteed.

The scale is extraordinary. Tesla is valued at roughly $1.5 trillion and SpaceX at $2 trillion, so a combination would rank as the largest merger ever undertaken. Any deal would require shareholder approval, with half of Tesla's investors needed to back it, a threshold Musk himself described as quite a high hurdle. As chief executive of both companies, he cannot take part in those discussions.

He nonetheless sees a lot to be gained. Bringing the businesses together would combine Tesla's cars, robots and self-driving technology with SpaceX's rockets, data centres, satellites and telecommunications operations, and would align their work on chips and artificial intelligence. It could also advance his mission to build a self-sustaining city on Mars, a vision that has attracted sceptics as much as backers. Over the past year Musk has been consolidating his interests, with SpaceX acquiring xAI and X, formerly Twitter, before going public.

Analysts expect the deal to proceed. David Nicholson, chief technology adviser at the Futurum Group, puts the likelihood at 100%, a question of when rather than whether. The unveiling of the Tesla Roadster last week, a futuristic electric car powered by SpaceX rocket thrusters, struck him as a symbolic embodiment of the two companies converging. Dan Sheehan of Telos Wealth Advisors believes shareholders will ultimately back the combination because the technologies complement each other, though he cautioned that Tesla investors would hold a smaller slice of a much larger and more complex business. There is no real precedent, he said, for how a public company like Tesla gets priced in such a transaction. SpaceX shares rose 8% in after-hours trading, while Tesla climbed 2%.

For customers, the near-term changes are likely to be modest. Nicholson said vehicles seemed almost an afterthought beside the potential to combine the two firms' technological capabilities. Tesla is already shifting its priorities, having said earlier this year that it would concentrate on its best-selling Model Y and Model 3 at the expense of less popular models, and it has begun producing humanoid Optimus robots at a plant in California. Pairing Tesla's self-driving and robotics work with SpaceX's AI and satellite network could yield more capable vehicles, Sheehan suggested, though the question is how much priority cars receive inside a company increasingly driven by AI infrastructure. Tu Le, founder of Sino Auto Insights, said the Roadster showcase hinted that SpaceX technology could be drawn into future Tesla products, potentially attracting more buyers. The Cybertruck maker faces intense competition from Chinese manufacturers such as BYD, which overtook Tesla as the world's largest electric vehicle producer in January.

The biggest winner is likely to be Musk himself, the world's richest man and, since earlier this year, its first trillionaire. A merger would give him greater voting control over the combined company than he holds at Tesla today, a consideration the special committee will have to weigh. A single entity would make it easier for him to pursue his AI strategy as he sees fit, Sheehan said. The deal does not add to his wealth, but it concentrates it further in one stock.

It may also invite scrutiny. Musk is already a polarising figure in the United States, and the transaction could face greater regulatory pressure should the Democrats, many of whom have been critical of him, gain seats in next month's midterm elections. Shareholders have indulged him before: last year Tesla investors approved an unprecedented compensation package valued at around $1 trillion. Nicholson doubts Musk will be preoccupied with the merger's effect on his fortune. The deal, he said, brings him closer to his mission in life, the colonisation of Mars.