What happened

Shares of electric-vehicle battery start-up QuantumScape (QS -2.99%) were on fire Tuesday morning, soaring by as much as 15.9% as of 10:15 a.m. EDT.

Its prime product might still be in the development stage, but its battery technology is already finding takers among some of the world's largest automakers.

So what

Through a regulatory filing dated Sept. 21, QuantumScape reported Tuesday morning that it recently signed an agreement with a second automotive original equipment manufacturer (OEM) that's among the top 10 globally by revenues.

QuantumScape didn't reveal which company the deal was with, but stated the auto manufacturer has already evaluated its early cells and has now agreed to evaluate its advanced prototypes of solid-state battery cells, as well as purchase 10 megawatt-hours (MWh) of capacity from its pre-pilot production line facility dubbed QS-0 for "inclusion in pre-series vehicles." QuantumScape will deliver the advanced prototypes before QS-0 starts commercial production in 2023.

A person plugging a charger into an electric car.

Image source: Getty Images.

QuantumScape is using ceramic separators in place of a liquid electrolyte solution to build solid-state batteries that are smaller, more power-dense, longer-lasting, and safer than traditional lithium-ion batteries. A solid electrolyte also means these batteries can charge more quickly and will degrade more slowly than lithium-ion batteries. In short, these batteries could change the future of the EV industry.

Solid-state batteries have been costly to produce, but QuantumScape believes it has found a viable solution to that with its ceramic separators. To be sure, several automakers have tried to make breakthroughs in this technology over the years. Toyota, for example, recently announced a $13.6 billion investment in battery technology, including solid-state batteries made using sulfur-based electrolytes. QuantumScape, however, is leading the pack. It has already built single-and-four-layer cells, and is now testing 10-layer battery cells that take it one step closer to viable commercial production.

Now what

While it's anyone's guess which OEM is on the other side of this new agreement, QuantumScape already has a long-standing partnership with Volkswagen (VWAGY -2.12%), the world's second-largest OEM in terms of 2020 revenue. QuantumScape could still be years away from commercializing its solid-state batteries, but the fact that another auto giant has already tested its cell prototypes and found them promising enough to warrant further collaboration was big enough news to lift investor sentiment regarding the stock Tuesday.