QuantumScape (QS 5.69%) is trying to change the electric vehicle (EV) landscape. Its solid-state, anode-free lithium-metal battery technology provides significant benefits that could help springboard mass EV adoption.
For investors, speculation on its success could pay off handsomely if several premises play out in the company's favor. As QuantumScape has been hitting some important milestones in the development of its technology, its stock has been moving higher. Shares are up about 65% year to date, including a jump of about 40% in just the last month. With its second-quarter financial and operational update just announced, it's a good time to see if there could be more substantial gains ahead.
Another step forward
Because of their composition, legacy lithium-ion batteries require trade-offs between power, energy, safety, and cycle life. QuantumScape hopes its solid-state technology will be able to repeatedly fast-charge over hundreds of cycles while retaining the majority of its discharge energy. That can lead to faster charging times with a more efficient and safer battery. It could also provide longer vehicle range with better performance and a longer life cycle than current lithium-ion batteries.
QuantumScape has arguably been the face of solid-state battery development because it has been open with investors on every step of progress. It shipped its first 24-layer prototype battery cells to customers in December 2022. It took the company two years from developing its single-layer solid-state lithium-metal chemistry to successfully prove the concept of multilayer cells and finally achieve the 24-layer version that potential customers are now testing for the EV manufacturing process.
QuantumScape just released its second-quarter results, and frankly, there was not much for investors to like, financially speaking. But at this stage of development, that's to be expected. And it has made important strides. In the second quarter, the company said it shipped unit cells to several potential automotive customers that included the parameters required for its intended commercial design.
QuantumScape is still spending funds to develop and prove its technology.
And while it hopes to begin generating revenue through commercial sales by 2026, QuantumScape ended the second quarter with more than $900 million in liquidity that it believes will support its needs into the back half of 2025.
Other risks exist beyond funding requirements, too. While the work so far has provided proof of concept, the technology hasn't proven itself in practical applications yet. As the company put it in the recent quarterly update, "there is much work still to be done on our path from prototype to product, and unforeseen challenges will almost certainly arise."
And there is plenty of competition to be aware of as well.
Beware the competition
Global automotive manufacturers Toyota and Nissan have also been working on solid-state batteries internally. Toyota recently held a technical update session that revealed the company's strategy regarding EV batteries. The company thinks solid-state batteries similar to what QuantumScape is developing are now entering the "practical application phase." The automaker plans to commercialize its version by 2027 or 2028.
Nissan has said by mid-2028, it aims to launch an EV with all-solid-state batteries that have been developed in-house. The company plans to use the batteries for various vehicle models, including its pickup trucks. After recently announcing its nearly century-old Yokohama engine plant in Japan produced the 40 millionth engine in June, Nissan said it was preparing to build a solid-state battery production pilot line at the facility next year. That is notably at the plant that launched the all-electric Leaf in 2010 and shows other players see potential in the solid-state battery technology.
There may be room for multiple solid-state battery suppliers.
It also means there will be stiff competition from solid-state battery manufacturers if and when the technology is approved for commercial use. But as the chart above shows, the global market for EVs is expected to be huge in just a few years, and it likely won't be a zero-sum game for battery suppliers.
Investors should realize, however, that those estimates may not pan out, or the timeline might be extended. That just adds to the speculative nature of any investment in QuantumScape. Yet if it holds to its current timeline for commercialization, the company could have a one- or two-year lead on its larger competitors.
