Electric vehicles (EVs) are changing the auto industry. Costs have come down, consumers are interested and buying, and every automaker from startup to legacy giant is putting serious money behind their EV ambitions. But just as with any mass-market product adoption, there remain major challenges. EVs are still expensive, weigh a lot more than a comparable oil-fueled automobile, and suffer from limited range and longer refueling. 

In other words, there's still a long way to go before EVs can truly compete, apples to apples, with legacy cars and pickups. 

Therein lies the bull thesis for QuantumScape (QS 5.69%). Its advanced, solid-state batteries, can help address many of the problems with current technology. Lighter weight, faster charging, longer range. The problem? It's likely those batteries are still at least a year or two from going commercial, and multiple years from being ready for mass production. As a result, shares have fallen 94% from the peak; the story sold a lot of stock, but investors are never patient with story stocks that don't quickly deliver the goods. 

But I'm no selling, despite owning a painful 77% loss in my own portfolio. Keep reading for a closer look at QuantumScape, why I'm holding, and why there's a potential case to buy more shares of this higher-risk start-up. 

The short version of what QuantumScape is trying to do

Lithium batteries have changed the world, and the massive growth in global manufacturing capacity and a lot of work to optimize the chemistry, has resulted in a technology that's "good enough" for many transportation needs. There are a range of great vehicles available from Tesla, Ford, NIO, and a dozen other start-up and legacy automakers that cost less than $50,000 and can travel 250 miles or more on a single charge. 

But when you start pricing a car closer to $30,000 or less, the range falls to 150 miles or less and charging isn't as fast. Simply put, those edge cases where car ownership is nice -- a road trip on a long weekend, for instance -- become major hassles. And solving those edge cases, or simply removing range anxiety costs a lot of money. Plus, the batteries steadily hold less and less charge, further cutting into usable range. 

QuantumScape is working to solve essentially all of these problems. The company says that its solid-state technology can charge up to 80% capacity in 15 minutes, and more safely with a non-oxidizable separator, last more than 150,000 miles and a dozen years, and drive the cost of an EV with 300+ mile range to below $30,000. Management says they can accomplish all of that, while also making a battery that's smaller and lighter. 

This is a simply massive market opportunity

For context as to what that's worth, S&P Global Mobility estimates just under 84 million light vehicles will be sold in 2023. With an average battery cost of between $4,000 and $20,000 per EV according to JD Power, this is a nearly $700 billion market at the midpoint of price estimates, at 100% EV adoption. 

Of course, we are decades away from full EV adoption, and no company will have total market share. But those numbers make it clear why this is such an appealing market and opportunity. Hundreds of billions of dollars mean that even taking a small piece of the global pie would prove very lucrative. 

Whether QuantumScape is a buy or not

The reality is, QuantumScape has a lot of potential, but has not delivered any financial or operating results we can use to value the business. At this point, it's all back-of-the-napkin math based on the potential market size, and QuantumScape's ability to take a share. 

What do we have in its favor? As a starting point, it does have some significant players lined up as partners. Volkswagen AG (VWAGY 1.26%) was an early investor, and is the one large global automaker we know it's partnered with. It touts two other top-10 automakers, two global luxury OEMs, and a pure-play EV company, as contracted customers to take product from QS-0, its first manufacturing facility that's still being developed. It also has a joint venture with Volkswagen that includes a potential 21 GWh/yr of manufacturing capacity. In other words, VW is making a pretty significant bet that QuantumScape's solid state battery technology will work and be cost effective. 

We also know that it has sent sample battery cells to its OEM partners for testing, and that the initial results have been very favorable. It has also engaged with and signed at least one agreement with consumer electronics and energy storage systems companies. So there's some evidence that its technology works as promised, and demand across multiple industries. 

But what we don't know is whether it can manufacture those cells at scale, and at costs that are profitable. And we're not likely to know the answers to those important questions for some time to come. 

Risk-reward: Making the right decision for your portfolio

I'm not looking to buy any more QuantumScape stock just yet; as I laid out above, there's still a lot we don't know, and I've bought as much as I'm willing to risk until we start to see concrete evidence that the technology both works, that it can manufacture it and make money doing it. Once that happens, I'll definitely consider buying more. 

But that's a decision based on my risk tolerance. Depending on your individual situation and relationship with risk, we do know more about QuantumScape now than when I bought my shares, and it's generally positive and points toward a decent chance at success. But it's still likely to be years before we really know if it can pull off what it's trying to do, and in a way that makes money for the company and its investors.