What happened

Shares of QuantumScape (QS -1.23%) soared 26% higher in July, according to data from S&P Global Market Intelligence, as the next-generation electric vehicle (EV) battery maker rallied along with the broader market.

The stock is still down 44% year to date and is more than 71% off its 52-week high, but investors enjoyed the respite from the continuously declining value of its shares.

So what

QuantumScape is a pre-revenue company, meaning it doesn't have any sales yet, but its revolutionary technology that allows for safer and faster charging of electric car batteries has gained a lot of attention from the industry.

Backed by German automaker Volkswagen, the battery maker is looking to upend the $300 billion industry. And as energy prices skyrocketed, consumer and investor interest in the EV market took off again.

That meant QuantumScape's battery technology gained new interest, too. Fires are a risk for lithium-ion batteries during the recharging process, but QuantumScape says its technology virtually eliminates that risk. It's not just the battery maker's word, either, as several independent testing labs have apparently confirmed the technology's potential.

The problem for QuantumScape is moving from theory to practice and being able to ramp up production. Also, with the average cost of a new electric car running about $66,000, they're not going to be on the radar for a lot of people looking to buy a new car if the economy collapses into a recession.

Now what

Last month's market melt-up was basically a case of a rising tide lifting all boats in QuantumScape's case. There was no specific news or achievement to account for its shares rising so much, but when shares of EV makers like Tesla and Nikola were rising 30% or more, the drafting effect naturally pulled up component makers like QuantumScape.

Yet the news has not been all that positive in the space. Faraday Future Intelligent Electric recently pushed back initial production of its FF 91 EV and will need additional cash for the commercial launch. Similarly, Lucid Group just cut its production forecast amid supply chain woes.

While there are speed bumps, there is still significant potential for EV adoption in the years to come. It seems smart that some investors are speculating that QuantumScape's solid-state battery technology may be part of that future, and that likely helped drive shares higher last month.