By Noel Randewich

SAN FRANCISCO (Reuters) - Potential losses are building against traders who have bet against Tesla Motors Inc <TSLA.O>.

The electric car manufacturer's stock has surged about 25 percent since it posted upbeat quarterly results in early February. At the same time, activity by short sellers - who bet that a company's shares will fall - has hit an all-time high, and the interest rate paid by short sellers has skyrocketed.

Even after recent gains, Tesla's stock remains down 21 percent so far in 2016, with many investors rattled by production delays and the detrimental effect of cheap gasoline prices on demand for electric cars.

Tesla shares rose 1.1 percent to close at $188.34 on Wednesday. Bets against the carmaker gained more steam this week after closely followed short seller Citron Research tweeted that it expects the stock to fall to $100 this year.

Short interest is currently 26.5 percent of outstanding shares, up from 23 percent at the start of the year, and the cost of borrowing shares has more than doubled in that time, according to Markit Securities Finance.

Short sellers borrow shares and then sell them, hoping to buy them back at a lower price and then return them to their owner.

In the meantime, they must also pay interest to the shares' owner. Short sellers may pay a low interest rate to initially borrow a stock, only to see the rate increase as more short sellers make the same bet and shares available for borrowing become scarce.

With only about 1 million Tesla shares remaining on hand to lend out, the annualized interest rate paid by short sellers to borrow the shares has climbed to as much as 20 percent from around 3 percent two weeks ago, said Ihor Dusaniwsky, head of research at S3 Partners, a financial analytics firm.

"We definitely had demand-based pressure on rates and now, because there's almost no stock left, you have supply-based pressure," Dusaniwsky said.

(Reporting by Noel Randewich; Editing by Matthew Lewis)