Does SpaceX Going Public Change the Tesla Story?
The decision by SpaceX to go public does not meaningfully alter the investment thesis for Tesla. For anyone holding the stock, the case rests on Tesla's transition away from being primarily a seller of automobiles and batteries toward becoming a company that sells real-world AI software — software for self-driving, robotaxi operation, and the Optimus humanoid robots. That fundamental narrative is unaffected by SpaceX's public listing.
The one scenario that would move the needle is a merger announcement between the two companies. Were that to happen, the shares of both Tesla and SpaceX would very likely react. For the time being, however, Tesla is being valued largely on the market's enthusiasm for its long-term transformation into a leader in real-world AI.
Is Tesla Still Fundamentally a Car Company?
Despite all the forward-looking enthusiasm around the technology story, the market still treats Tesla as fundamentally a car company at the level of valuation. That is precisely why vehicle deliveries remain so important as a metric.
Consensus expectations point to roughly 400,000 deliveries for Q2, a figure that is right on track with the expected cadence for the year. The expectation is for another quarter of deliveries growth. Q1 produced about 6% growth, and Q2 is anticipated to show a similar mid-single-digit growth rate.
The harder period is expected to arrive in Q3, which is likely to bring a decline. The reason lies in the comparison base: last year there was a major rush among U.S. buyers to purchase an EV before the U.S. EV tax credit expired at the end of September. That surge makes Q3 an especially difficult quarter for Tesla to comp against.
Strength Abroad Offsetting U.S. Weakness
Even as EV sales decline in the U.S. market, there are substantial positives outside the country. In Europe, with full self-driving moving closer and closer to approval, sales are up almost 60% year-to-date across the continent. In China, May sales were up. As a result, while a full-year deliveries decline is expected, it should be modest — and certainly far smaller than the overall decline in the U.S. total EV market.
So the strength in Europe and China, particularly tied to full self-driving (FSD), is expected to offset the slowing or weakening demand in the United States. FSD is also expected to keep Tesla's deliveries from falling as sharply as those of other automakers in the U.S.
Pricing plays a role here as well. The cheaper Model 3 and Model Y prices introduced starting in Q4 of last year have enticed additional buyers. These price cuts put Tesla into the below-$40,000 range for a starting vehicle price. At that point, a Tesla competes as a mid-size SUV comparable to a Honda CR-V or a Toyota RAV4 — the two best-selling mid-size SUVs. At that price level, many buyers begin to consider a Tesla, and some end up purchasing one, which helps offset the loss of the tax credit.
There is also the broader question of how many people are rethinking their view of EVs in light of higher oil prices. With gasoline reaching four, five, six, or seven dollars a gallon, the economic appeal of electric vehicles strengthens.
The Business Case for a Tesla–SpaceX Merger
The idea of a merger between Tesla and SpaceX is not new and has been discussed for some time, with many observers offering opinions. There is, however, a solid business case for it, rooted in the convergence between what SpaceX wants to do with its AI platform and what Tesla wants to do with its real-world AI platform.
Several points of integration stand out:
- Grok as a consumer interface. The Grok large language model could serve as the consumer-facing interface for much of Tesla's real-world AI — whether that means cars driving themselves for personal use through FSD, robotaxi operation, or controlling an Optimus humanoid robot. Grok could let consumers and business users instruct the robots in much the same way they would tell a human worker what to do in a manual-labor job under the current labor situation.
- Starlink connectivity. Starlink could ensure connectivity for Tesla vehicles, and especially for robotaxis, which will need to remain connected at all times.
- Tesla as a key supplier to SpaceX. From Tesla's side, it could become one of SpaceX's key suppliers — providing solar panels, batteries, and components such as the casings used for larger spaceships that can carry more cargo.
This points to a genuine convergence of the two companies, in which each would help the other and serve as a key supplier to the other over time. That mutual dependence is part of what makes a merger sensible.
Beyond the operational synergies, there is the obvious factor of leadership: the same individual serves as CEO and largest shareholder of both companies. A merger would allow him to face fewer governance issues when moving engineers and software developers between the two companies and reassigning them across different projects as he sees fit. Taken together, these elements form a strong business case for a merger to occur.
What Could Work Against a Merger?
Although many parts of the two businesses are complementary, there are factors that could weigh against a merger. The biggest concerns are potential governance issues and potential regulatory concerns — particularly from the U.S. side, given that SpaceX is a large enterprise with significant national and strategic importance. These governance and regulatory hurdles represent the most likely obstacles that could act to prevent a merger in the future.
