What happened

Shares of QuantumScape (QS -1.65%) fell a brutal 76% in 2022, peaking the first week of trading and steadily declining during a volatile year and falling 86% since mid-November of 2021, according to data provided by S&P Global Market Intelligence. However, QuantumScape's stock decline actually started a year before; shares are down a portfolio-crushing 97% since early December 2020, a few weeks after going public via a special purpose acquisition company merger.

Needless to say, it's been a brutal couple of years for investors in the company, which is working to develop and commercialize solid-state battery technology. 

So what

The excitement around QuantumScape's technology makes sense. The company says its solid-state tech would unlock a step change in the performance and cost of electric vehicles (EVs), making a car with more than 300 miles of range possible for less than $30,000, and able to charge in less than 15 minutes. All while also being lighter and potentially safer than today's liquid and gel lithium ion batteries.

The catch? That technology has yet to move beyond the lab and into the manufacturing plant, where it could disrupt the current EV battery companies. The company has only just begun the early stages of test manufacturing, and it's still years short of full commercialization. Over the past couple of years this has become more apparent to the wider investing community, and the early excitement has faded, sending the stock price back to earth. 

The thing is, management has been consistent with setting expectations. The company has never overpromised a fast track to commercial success. Investors have just set their expectations way too high. 

Now what

QuantumScape has to continue working toward commercialization. This is more than just building factories and making batteries; the company is still working to demonstrate it can make this new technology at both a scale and a cost that competes with current technology. Additionally -- and every bit as important as cost -- the company must also demonstrate that its batteries are both reliable and safe. On paper, solid-state tech should result in batteries that last longer -- the company expects 240,000 miles of usable life for its first generation -- which will also weigh less and be safer. It's going to have to prove that, via significant real-world testing with its automaker partners. And it has only recently begun sending prototypes to original equipment manufacturers. It is years away from commercialization. 

Most importantly: It's going to have to do all that in a very different capital environment than it went public in. Rising interest rates and a crushed stock price mean additional funding will be more costly, and it consumed $300 million in working capital through the first nine months of the fiscal year. It has a sizable $1.1 billion in cash and equivalents it can work from for now, but at some point, it will need to raise more money. Investors should hope that's to build a factory, not to cover operating costs because it's run out of cash but still isn't ready to go commercial. 

Could QuantumScape eventually surpass its prior stock price highs? It's possible. But it's unlikely to happen for many years to come if ever, and frankly, it's also possible the company is never a commercial success for investors.