Elon Musk is denying a report that Tesla executives have discussed separating the company's China business as part of a possible future merger with SpaceX.

The Wall Street Journal reported Thursday that Tesla advisers had explored options including spinning off, selling or even shutting down the company's China operations to clear potential obstacles to combining Tesla with Musk's rocket company.

Musk dismissed the report on X, writing: "This has never even come up in a discussion ever."

He later called the report "absurdly fake news."

The Journal said the discussions were preliminary, the timing was unclear and no final decisions had been made.

A merger between Tesla and SpaceX would likely face intense regulatory scrutiny, particularly because SpaceX is a major U.S. defense contractor while Tesla operates one of its biggest manufacturing hubs in China.

Speculation about combining the two companies has circulated for years but intensified after SpaceX's recent $75 billion fundraising and comments from Musk last week, when he declined to rule out a future merger, saying there was growing overlap between the businesses.

According to the Journal, Musk has also instructed Tesla executives in recent years to focus on separating the company's U.S. and China operations so the American business could continue operating if geopolitical tensions between Washington and Beijing escalated.

Tesla's Shanghai Gigafactory is the company's largest manufacturing plant and produces more than 950,000 vehicles annually. The factory serves both the Chinese market and exports vehicles to Europe, Canada and countries across the Asia-Pacific region.

China is Tesla's second-largest market after the United States, although the company faces growing competition from domestic electric vehicle makers led by BYD.

The Journal reported that executives had discussed creating a separate company to manage exports from Shanghai, establishing independent office systems and limiting China-based employees' access to other parts of Tesla's operations.

JPMorgan analysts said any merger between Tesla and SpaceX would face major regulatory hurdles, particularly in China, where SpaceX's close ties to the U.S. government and national security work could complicate approvals.

SpaceX President and Chief Operating Officer Gwynne Shotwell said in June that combining the companies "might make Elon's life a little easier" by simplifying management of his businesses.

Tesla has previously said more than 95% of the parts used in its China-built Model 3 and refreshed Model Y are sourced locally through more than 400 domestic suppliers. Deliveries of China-made Model 3 and Model Y vehicles rose 24.4% year over year in June, while second-quarter sales and exports from the Shanghai factory climbed 32.8%.

Neither Tesla nor SpaceX immediately responded to requests for comment outside normal business hours.