What happened
Shares of QuantumScape (QS 1.43%) were trading sharply higher Wednesday after the start-up provided an update on its research-and-development efforts and said that it will soon have enough cash to get its innovative batteries into production.
As of 2:15 p.m. EST, QuantumScape's shares were up about 23.4% from Tuesday's closing price.
So what
QuantumScape reported its fourth-quarter and full-year results after the market closed on Tuesday. Most of the numbers were about as expected, given that the company doesn't yet have any meaningful revenue: On an operating basis, it lost $30.2 million in the quarter.
But there were a couple of items of note. First, in the wake of the merger that took it public last year, it now has about $1 billion on hand -- and it expects to receive another $100 million from strategic investor Volkswagen (VWAGY 0.84%) by the end of the first quarter. That's enough to see it through the start of production of its solid-state batteries, it said. (Put another way, QuantumScape won't need to raise additional capital any time soon.)
Volkswagen's deep pockets, and its huge commitment to electric vehicles, have bolstered the investment case for QuantumScape. Image source: Volkswagen AG.
Second, it reported that it has hit another testing milestone with its solid-state battery cell prototypes. After successfully testing a simple single-layer cell in December with good results, it has now tested a multiple-layer cell -- closer to what its actual production cells will be -- and found that it retained over 90% of its energy-storage capacity after 800 charge-and-discharge cycles, another strong result.
Now what
Auto industry investors should keep two things in mind with respect to QuantumScape. First, the timelines in battery development are very slow: This is a 10-year-old business that is hoping to begin production of its battery cells in 2024.
Second, QuantumScape isn't the only company working on solid-state batteries for electric vehicles. While its technology looks impressive, and its partnership with Volkswagen is promising, some of its potential rivals haven't yet shown their hands -- and some of those rivals have very deep pockets.
