What happened
QuantumScape (QS 2.15%) shares have soared 75% so far in 2023 as the company makes progress in commercializing its solid-state battery technology for electric vehicles (EVs). But the shares dropped today when investors took notice of a new threat to the company's future. As of noon ET, QuantumScape stock was down 4.6% on the day.
So what
Today's drop comes on the heels of QuantumScape's fourth-quarter earnings report it released last week, when the stock also plunged. But the most recent decline may be from other news in the sector from the largest EV battery maker. China-based Contemporary Amperex Technology -- better known as CATL -- unveiled a new pricing strategy that could have significant impacts in the sector, Barron's reported this morning.
QuantumScape is still a prerevenue company, and its technology has yet to be proven at the commercial level. But even if that comes to pass, CATL's pricing strategy might significantly impact potential future profits for QuantumScape and other EV battery makers.
Image source: Getty Images.
Now what
According to the report, CATL plans to price its batteries using a locked lithium price basis that is much lower than current spot prices for the critical battery metal. The move effectively will result in a large discount for batteries to EV makers. The strategy seemingly leverages the company's ability to mine some of its own lithium and its willingness to trade profits in that business for higher battery sales volumes.
QuantumScape is already a very speculative investment, with commercialization still at least more than one year away. Its solid-state technology should provide QuantumScape with its own advantages over the competition through performance. But if a pricing war is what the largest battery maker wants, investors are being handed yet another risk that has some selling QuantumScape shares today.
