A Tesla-SpaceX merger runs into a China problem on both sides

Elon Musk, who runs electric carmaker Tesla and rocket company SpaceX, said: "Do I think it would be a good idea? Yes." He added that shareholders would have to support it. Analysts say a combination could make some business sense.

Tesla supplies solar panels and batteries used aboard SpaceX satellites, and Tesla self-driving cars use Starlink. The companies are developing chip production jointly, and both are spending heavily on artificial intelligence. Ryan Mulberry, chief market strategist for Zacks Investment Management, says a combined balance sheet would let Tesla draw on SpaceX engineering without arranging a separate license or payment between the two sides.

The complication is where Tesla builds its products. Tesla makes cars in China, while SpaceX performs work for the Pentagon.

Seth Goldstein, a senior equity analyst at Morningstar, said: "The U.S. government may not like having a U.S. defense contractor that's relying on the Chinese government for its key manufacturing operations."

Reporter John Ruich noted that officials in Beijing might likewise oppose a U.S. military-linked company doing business in China or operating automated vehicles there.

So a combination that could make sense as a business matter still faces possible government concerns tied to China. Goldstein flags the China manufacturing link as one such concern, among broader regulatory hurdles.