There's no lack of interest from investors regarding QuantumScape (NYSE: QS) stock. The electric vehicle (EV) battery start-up is trying to solve some of the biggest headwinds to EV sales growth. Range anxiety, charging times, and battery safety are keeping some potential EV buyers on the sidelines.
If QuantumScape's solid-state battery technology solves those issues, the potential market is enormous. That's why it seems QuantumScape stock soars with any sign of success. But proving, implementing, and then commercializing the technology takes time. And each spike in the stock after promising news has given back those gains this year.
While EV sales continue to grow worldwide, the rate of growth has slowed. Yet if QuantumScape can commercialize its next-generation battery technology, several of the concerns among potential EV buyers will be addressed. With EVs recently only representing about 13% of the global light vehicle market, there's a huge market opportunity for QuantumScape. And recent updates from the company show it is closer than ever to achieving its goals.
QuantumScape's path to success
2024 looks to be a transitional year for QuantumScape on several levels. After introducing its first commercial product and deploying the first stage in its fast manufacturing process in 2023, the company expects to begin initial prototype production and scale up the manufacturing process this year.
Advantages of QuantumScape's solid-state lithium-metal battery technology over conventional lithium-ion include:
The solid-state electrolyte-separator is nonflammable and noncombustible
It enables a fast charge in approximately 15 minutes
Efficiency can improve battery cycle life with less capacity loss
It lowers manufacturing costs by eliminating anode host material to help achieve lower EV prices for mass market adoption
QuantumScape has a two-stage plan to mass produce the solid-state electrolyte-separator required for the lithium-metal anode. It is in the midst of ramping up the first stage "Raptor" process to produce low-volume prototypes. It is also preparing for the next "Cobra" stage to begin in 2025.
Like with any technology start-up, however, investing in QuantumScape is speculative until the company proves it can produce a commercial product at scale. There's always a meaningful risk of running out of capital along the way, which will almost always crush a company's share price. But a recent announcement from QuantumScape has now helped to lower that risk.
Game-changing partnership
QuantumScape recently announced an agreement with PowerCo, the battery division of global automaker Volkswagen. Volkswagen was already an early investor in QuantumScape, and now the partnership moves to another stage to help support its own EV technology growth.
In its recent second-quarter earnings report, QuantumScape said the capital-light approach will now help extend its existing cash balance into 2028, or about 18 months further than what it previously told investors. That's a game-changing agreement that could help complete development and testing of its solid-state batteries. It also sets a framework for mass production that it can use with other customers as the licensing is non-exclusive.
QuantumScape isn't for risk-averse investors
The new agreement supersedes a prior joint venture, and now combines QuantumScape's battery technology with PowerCo's manufacturing prowess. But 2025 will still be a critical year for QuantumScape and its investors. Its Cobra phase will be key to higher volume prototype sample production next year, and is a core element of the platform that will be licensed to PowerCo.
There is still much risk in the steps remaining to achieve production at scale, and investors should allocate capital accordingly. QuantumScape's future goals still include high hurdles. As part of its plans for higher volume sample production, the company still needs to develop manufacturing processes, tools, and equipment to scale production of its solid separator.
While the new agreement is a formidable advantage moving forward, the stock remains speculative. But assuming several more successful steps in the process over the next couple of years, QuantumScape now could have what it needs in place to thrive in the future.
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Howard Smith has positions in QuantumScape. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
Prediction: QuantumScape Will Survive -- and Even Thrive was originally published by The Motley Fool