Elon Musk said during SpaceX’s quarterly results call on October 20 that Tesla and SpaceX were discussing a possible merger. A combination would bring the electric carmaker and space company into one group spanning vehicles, rockets, robotics and artificial intelligence.

Independent committees at both companies are assessing the proposal. Musk supports the idea but said the terms remain unsettled and an agreement may never be reached.

Independent directors lead the talks

Musk said he was staying out of the committees’ discussions because of his conflict of interest. He owns close to one-fifth of Tesla and just under half of SpaceX. Shareholders would also have to approve any eventual deal.

Reuters, citing a person familiar with the discussions, reported that talks began in recent weeks. One option under consideration would see SpaceX acquire Tesla. Tesla is working with an investment bank advising it on the discussions, Reuters reported.

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The companies’ valuations illustrate the potential scale. Portuguese news portal SAPO put Tesla’s value at about $1.5 trillion and SpaceX’s at about $2 trillion. The terms of any transaction, including how shares would be exchanged, remain unresolved.

AI, chips and robots underpin Musk’s case

Musk said a merger could benefit work on artificial intelligence, chip development, robotics, satellite connectivity and launching cargo into orbit. Tesla is investing in autonomous vehicles and humanoid robots, while SpaceX is expanding its AI infrastructure business.

The companies already share a chip-manufacturing venture, Terafab. Musk said its first test chip was expected around May or June 2027. Mass production is planned for the third quarter of 2028.

The discussions come as SpaceX reports rapid growth. Third-quarter revenue reached about $14.6 billion, up 161% from a year earlier. AI revenue rose nearly tenfold to about $7.6 billion.

SpaceX reported a $4.4 billion net profit, compared with a $1.1 billion loss a year earlier. Its capital spending also rose sharply, nearly tripling to $19.6 billion.

Approval extends beyond the negotiating table

A combination could face regulatory and geopolitical scrutiny, Reuters noted. SpaceX supplies services and technology to US military and government agencies, while Tesla has substantial industrial and commercial ties to China.

Those ties include Tesla’s factory in Shanghai. Bringing the businesses together could attract closer attention from both US and Chinese authorities. For now, the independent committees still have to negotiate terms that shareholders would be asked to approve.