Shares of Tesla Inc. soared by more than 14% Wednesday as investors reacted positively to the return of Donald Trump to the White House. The expectation of a policy shift favoring the electric vehicle (EV) giant and its CEO Elon Musk drove market enthusiasm, with analysts forecasting a favorable environment for Tesla's dominance in the sector.

The resurgence of a Trump administration is viewed as potentially reshaping the regulatory and competitive landscape for electric vehicles in the United States. In particular, concerns over diminished subsidies for alternative energy and EVs-integral under President Joe Biden's Inflation Reduction Act-are seen as a threat to smaller competitors. Trump's proposed trade policies, including heavy tariffs on Chinese imports, are expected to limit the influx of lower-cost Chinese EVs, thereby solidifying Tesla's market lead.

"Tesla has the scale and scope that is unmatched," said Wedbush analyst Dan Ives in a note to investors. "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." Ives highlighted the potential for Tesla to capture even more market share as rivals face stiffer headwinds.

As Tesla shares surged, other EV companies faced stark declines. Shanghai-based Nio fell 5%, while U.S. rivals Rivian and Lucid Group dropped 9% and 8%, respectively. According to the Energy Information Administration, Tesla currently controls 48.9% of the U.S. EV market through mid-2024, a dominance that investors believe could be strengthened under anticipated Trump policies.

While Trump has not been a historical advocate for clean energy subsidies, his potential policy stance could create indirect benefits for Tesla. The Inflation Reduction Act, signed into law by President Biden in 2022, provided substantial tax credits for EV consumers and manufacturers. However, the new political climate could pivot focus, causing smaller players to struggle while Tesla leverages its established market position.

Elon Musk, a prominent figure in U.S. politics, was a major donor to Trump's campaign efforts, spending at least $119 million mobilizing support. Musk's close ties to the incoming administration could potentially play a role in shaping policy decisions favoring Tesla's growth trajectory. Additionally, Musk's outspoken engagement with political discourse has often sparked public and market reactions.

Despite the market enthusiasm, Tesla's recent journey has been turbulent. Sales and profit figures dipped during the first half of the year before a third-quarter profit uptick of 17.3%. Meanwhile, the company has faced scrutiny over its "Full Self-Driving" system following reports of accidents, including incidents under low-visibility conditions. The U.S. government's ongoing investigation covers approximately 2.4 million Tesla vehicles produced between 2016 and 2024.

Last month, Tesla faced a setback after unveiling its long-anticipated robotaxi, leading to a sell-off as investors expressed skepticism over the pace of its autonomous vehicle development. The robotaxi was viewed as a missed milestone, particularly as competitors advanced their own self-driving technologies.

Despite these hurdles, Tesla's stock now shows a 16% gain for the year, rebounding on renewed optimism tied to political developments. Tesla's potential strategic gains under a Trump presidency underscore investor confidence, even as broader industry challenges remain.