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Elon Musk's big bet on Donald Trump is already paying off for Tesla.
The EV's stock surged 12% in premarket trading and is poised to open at its highest level in more than a year following the election result.
Fox News called the presidential race for Trump early Wednesday morning. A little under four hours later, projections from CNN and other news organizations put Trump over the 270 Electoral College votes needed to win the presidency.
Wedbush Securities analyst Dan Ives called Trump's victory a "homerun for Tesla."
"Elon Musk's status as Trump's ally from the business community hasn't gone unnoticed by investors who have bid up shares in Tesla by 3% in pre-market trading on the election news," he said.
Musk has been an outspoken supporter of Trump during the election. The billionaire has spent the last few months campaigning for the president-elect, even joining him onstage at a campaign rally in Butler, Pennsylvania.
In his victory speech early Wednesday, Trump paid tribute to Musk's efforts, calling him a "super genius" and a "new star."
Gene Munster, the managing partner at Deepwater Asset Management, said Tesla's stock surge was based on an emotional response from investors and their confidence in the EV company's CEO.
"That emotion is Elon made a big bet and was right. This gives investors confidence that his next big bet has a greater potential to succeed," Munster said in a post on X on Wednesday.
Despite the surge in Tesla shares, Trump's victory could be bad news for the wider EV market.
Ives said the Trump presidency could be an "overall negative" for the EV industry, citing the possibility that the Trump administration could withdraw tax incentives and rebates for manufacturers.
However, Ives said it could be a "huge positive" for Tesla due to the company's scale and market position.
"Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the U.S. market over the coming years," Ives said in a note.
Tesla has been facing fierce competition in China, with rivals rolling out their own EVs at lower prices.
China-based BYD has been Tesla's main competitor in the region, taking the title of the world's top seller of electric cars from Musk's company at the beginning of the year.
Earlier this month, BYD scored another win when its quarterly revenues outstripped Tesla's for the first time.
BYD recorded revenues of 201.1 billion yuan ($28.2 billion) in the three months to September 30, up 24% from the same quarter last year. Tesla posted sales of $25.2 billion over the same period.
Representatives for Tesla did not immediately respond to a request for comment from Business Insider, made outside normal working hours.
