One Big Thing To Remember About QuantumScape Stock

What's up with battery start-up QuantumScape (QS -1.97%)? The company's solid-state battery technology has huge potential to make electric vehicles cheaper, safer, and easier to recharge. But as Industry Focus host Nick Sciple and Fool.com senior auto specialist John Rosevear explained in this Motley Fool Live appearance, recorded on Jan. 12, there's one big thing that QuantumScape investors need to keep in mind. 

A transcript is below the video.

Nick Sciple: Let's answer some questions. Richard O asks, "Teach us about solid-state battery technology. When will they go mainstream? Thanks." We'll do our best. I would say on any of these cutting edge technology area as I think the one thing that is important to point out just in general is, you make lots of predictions about what's going to happen? You're probably going to turn out being wrong, we could talk about  -- one of the trends John mentioned was AVs [autonomous vehicles]. Just a few years ago, we were talking about, we're all going to be riding around in autonomous robot taxis, and my kids are never going to have to have a driver's license, and that's probably not going to play out if you talk to a lot of folks in the space.

But John, what can you tell us about where we're at with solid-state batteries today, and what folks are telling us with timelines and things like that?

John Rosevear: First of all, if you wanted to have solid-state batteries work, I cannot explain it as well as the CEO of Quantumscape, and he did a video presentation in December going through this in plain English that any reasonably thoughtful investors should be able to readily understand -- not only what the technology is, but why it offers the advantages it does. You can find that on YouTube. Just go search Quantumscape, and you'll find it very quickly. [Editor's note: It's here.]

The gist is that these batteries can be, at least in theory, longer lasting than our current lithium-ion technology. They can recharge more quickly. They can be smaller and lighter. The challenge has been manufacturing them at scale, and at a reasonable cost with the quality and durability you'd need for autos. Those are the problems that people are just starting to work out right now. A lot of this has been shrouded in secrecy, really until recently, we heard a lot of rumblings about QuantumScape and its investors. But until this presentation in December, we didn't really know the details in their technology.

Toyota (TM 1.07%) has a solid state battery effort under way that is supported by public and private partnerships in Japan. They're promising to show a solid state electric vehicle next year. There are a couple of other companies coming into this space that aren't public yet. There are a lot of people working on this problem. What QuantumScape has, and why it's been the talk of investors in this space for the last couple of months, is a plausible path to commercializing this. Volkswagen (VWAGY -1.13%) is a strategic investor [in QuantumScape], so they also have a very big customer waiting as soon as they are ready to go and someone who can help them with manufacturing on a huge global industrial scale.

Still many questions to be answered as to when they will get there, how they will able to be able to get there. You're not going to see much of anything before 2024-2025 from QuantumScape. Whether anybody enters earlier is very much an open question. I mean Toyota, has dropped some hints, but we haven't seen their cards yet, so we don't know what they're holding.

Nick Sciple: Yeah. Because we're clearly at a point where batteries are becoming more important, there's this whole electric vehicle thing, and I went back and looked at battery development history, and at least the past couple of times have been 30 years apart. So we had in the 80s, the lithium-ion battery was a big discovery, and really started come to market significantly. I remember seeing one when I was a kid, maybe in the early 2000s when you saw them everywhere, all over the place. Then you had the nickel-cadmium batteries, I think it was the '50s and that grew from there about 30 years before that. Then before that was the lead acid battery, which is the turn-of-the century, or maybe a little bit earlier than that. We're on this kind of few decades cadence in each of those. It takes a while from this big breakthrough we discovered a thing to being everywhere.

I'm sure there's some people on here that can have a more first-hand experience than I do of how the lithium-ion has grown up over time. The issue with that is, what John said, getting this to production, consistent, and where you're not going to have a fire, and where you get a steady output at a reasonable price, and you scale up a supply chain, and all those sorts of things.

John Rosevear: We should say one thing about this. QuantumScape is a 10-year old company led by some of the smartest people in this space. They have just now gotten to the point [in December] where they could speak up and say, "We might have something." Ten years. [laughs] This is not going to be in your car in April. This is a very tough technical problem to solve in a way that makes sense for automobiles on a large scale.

Nick Sciple: Sure. Yeah. I would say, yeah any prediction we make is going to be a low probability on what turns out. Just as you're investing, or thinking about this space, that's something to keep in mind.