What happened
Shares of QuantumScape (QS 5.15%) were moving higher on Wednesday, as the company's stock price continued to recover after beginning 2021 with an abrupt 40% fall on Monday.
As of 2:15 p.m. EST, QuantumScape's shares were up about 19.4% from Tuesday's closing price.
So what
QuantumScape has given investors a wild ride since it went public following a merger in November 2020. After gaining almost 80% in December, the stock shed over 40% of its value in Monday's surprise sell-off, recovering somewhat on Tuesday and Wednesday.
What's going on here?
Solid-state lithium-ion batteries are kind of a holy-grail technology, promising to give electric vehicles longer range and shorter recharging times while being safer and more durable than current battery options. Researchers have been trying to perfect the technology for years, but so far nobody has been able to perfect a solid-state battery that is durable enough and inexpensive enough to make sense for automotive use.
Until now. What makes QuantumScape so interesting to investors is that it may have solved the puzzle.
Global auto giant Volkswagen is hoping that QuantumScape's solid-state batteries will power its next generation of electric vehicles, in about five to seven years. Image source: Volkswagen AG.
Now what
QuantumScape operated in near-secrecy for about a decade, but it broke its silence when it presented an overview of its solid-state battery technology last month. Simply put, it appears to be the real deal. But QuantumScape executives have made it clear that it's a long way from being a product. They believe that even with help from strategic investor Volkswagen (VWAGY 2.74%), it will take at least a few years to perfect the technology and -- crucially -- to figure out how to manufacture the batteries at scale and at a reasonable cost.
High expectations plus high risk is a classic recipe for a volatile stock, and that's the most likely explanation for QuantumScape's recent price gyrations. Auto investors shouldn't be surprised if the stock's ups and downs continue for a while longer.
