Tesla shares rise 13% after Trump's election victory

NEW YORK – Tesla shares rose on Wednesday following Donald Trump's election victory, an outcome that CEO Elon Musk had strongly supported in the final months of the race.

Under a Trump administration, Tesla is expected to make significant profits, with the threat of reduced subsidies for alternative energy and electric vehicles hurting smaller competitors the most.

According to the Energy Information Administration, Tesla dominates electric vehicle sales in the U.S. with a 48.9% market share by mid-2024.

Tesla shares rose 13% on Wednesday, while shares of rival electric vehicle makers slumped.

It wasn't just Tesla. Banks and oil companies also rose on Wednesday. Trump's company, which runs his social media platform, boomed, as did Bitcoin, thanks to Trump's comments that he would make the US the world's dominant crypto market.

In early trading, the Dow Jones industrial average rose more than 1,300 points, or about 3%, amid expectations that a second term for Trump as president will bring major policy changes, including more tax cuts, more deregulation, more mergers and Acquisitions and more domestic crude oil production.

Trump has proposed tariffs of 10% to 20% on foreign goods that would also impact electric vehicle makers outside the U.S., particularly in China, and shares of electric vehicle makers there also fell in U.S. markets.

“Tesla has unprecedented scale and scope,” Wedbush analyst Dan Ives said in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in an environment without EV subsidies, coupled with likely higher tariffs in China that would continue to squeeze out cheaper Chinese EV suppliers.”

Clean energy subsidies are part of the Inflation Reduction Act signed into law by President Joe Biden in 2022. It included tax credits for manufacturing and tax credits for electric vehicle consumers.

Shares of rival electric vehicle maker Rivian fell 9% and Lucid Group fell 3.1%. NIO, a Chinese electric vehicle maker, fell 6%.

Musk was one of Trump's biggest donors, pouring more than $70 million of his own money into the presidential election and other Republican causes. He also promised to donate $1 million a day to voters who sign a petition for his political action committee.

Still, it was a difficult year for Tesla, as sales and profits fell in the first half of the year. Profit actually rose 17.3% in the third quarter.

The U.S. launched an investigation into the company's “Full Self-Driving” system after reports of accidents in low visibility conditions, including one that killed a pedestrian. The study covers around 2.4 million Teslas from model years 2016 to 2024.

And investors sent the company's shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio on Thursday evening. Tesla hasn't seen much progress in autonomous vehicles, while other companies have made notable progress.

Tesla began selling the software called “Full Self-Driving” nine years ago. However, there are doubts about its reliability.

The Los Angeles Times contributed to this report.