The electronic vehicle (EV) industry is on fire with new entrants constantly emerging as either startups (NIO, Lucid Motors) or legacy automakers (Ford, Volkswagen) releasing electric models.
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The drive is fueled by government regulations, technology advancements, and an ever-growing global charging infrastructure. On the technology front, we land on companies like QuantumScape (NYSE: QS), a solid-state EV battery company that was founded in 2010 by a Stanford University professor and two students.
What makes solid-state so special? Higher energy density, faster charging times, fire-related safety, operation in sub-zero temperature due to a lack of wet components, and cost benefits. With over 200 patents on the tech, QuantumScape is in fine form to be a top contender in the sector, but when? Company leadership expects to start production in 2024, so we ask: is QuantumScape a good investment yet?
The Bull Case for QuantumScape
Currently, you can get an internal combustion engine (ICE) vehicle that goes 300 miles per tank and takes no longer than 10 minutes to fill up. QuantumScape’s solid-state batteries come closest to matching these specs compared to ‘wet’ batteries and more as they can cover 30% more range, achieve an 80% charge in 12 minutes, and are less prone to overheating than the liquid-type batteries currently on the market. These groundbreaking figures attracted the attention of investors like Bill Gates, JB Straubel, and Volkswagen; in fact, Volkswagen’s investment is so far up to $300 million, which was issued in $100 million tranches every time a new technical milestone was achieved by QuantumScape.
Of the many patents the company holds, one of its most important developments is in its playing card sized, hair-thin, flexible ceramic separator that can function in temperatures lower than those that render competitors’ parts inoperable. This is a powerful advantage and moat against other players in the field. And speaking of the field, EV is not the only sector wherein solid-state batteries can be advantageous; QuantumScape can also make batteries for telephones, tablets, and airplanes which are already starving for battery advances. The company has enough cash on hand ($1.53 billion) until it finally goes to market.
The Bear Case for QuantumScape
QuantumScape is 11 years old and has yet to produce a viable battery. Many experts feel that the promise of solid-state batteries is akin to the promise of cold fusion: only 10 years away, every 5 years. In fact, a white paper published by Sila Nanotechnologies last year predicts a $50 per kilowatt-hour (kWh) (currently $126 kWh) fast-charging traditional ‘wet’ battery cell within the next 5 to 10 years, and solid-state, if successful, to be relegated to a niche market.
Another challenge seen by the bears is the fact that not only has there never been a solid-state battery manufactured for sale, but if the company can in fact scale mass production of the units. The struggle is further magnified by the fact that an entirely new factory would need to be built to accommodate the new solid-state tech and that can cost billions. In an effort to raise capital, the company has raised its outstanding shares tenfold in the last 6 months, thereby diluting shareholder value. Finally, there’s the question of competition and it’s an important one as none other than tech behemoth Apple plans on releasing its own EV and battery in 2024; other competitors include financially superior companies like Samsung, Panasonic, LG Chem, and EV superstar Tesla.
So, is QuantumScape a watch?
Investors should be wary of this opportunity until they see a viable product on the market. Don’t fear the inevitable stock-price surge in that event, as the sky would be the limit should QuantumScape deliver on its promise of an honest-to-goodness solid-state battery.
1. Who is the CEO of QuantumScape?
Co-founder Jagdeep Singh
2. When did QuantumScape go Public?
November 27, 2020 via a SPAC merger with Kensington Capital Acquisition Corp
3. What is the potential value of the solid-state battery market?
Total Addressable Market (TAM) of $230 billion by 2030
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