QuantumScape (QS 5.69%) stock kicked off 2023 in high gear after its solid-state battery cells passed a key endurance test at a subsidiary of automaker Volkswagen. The automaker has been a key partner and investor in QuantumScape for more than a decade now, has tested several of the company's battery cells at its laboratories, and is expected to be the first company to commercialize vehicles using QuantumScape's solid-state battery technology.
So when a report appeared suggesting that Volkswagen is looking at more options and has started talks with other solid-state battery makers, given the persistent delay in QuantumScape's commercialization, the stock was bound to be hit. That's what happened on Tuesday, when QuantumScape stock fell. By 2:30 p.m. ET, it had dropped more than 5%.
Is Volkswagen looking for alternatives to QuantumScape?
Volkswagen is reportedly in talks with France's Blue Solutions for its solid-state batteries, according to a report from Reuters that came out on Tuesday morning. The companies could reportedly finalize an agreement in the coming months.
Blue Solutions, a Bollore group entity, is already mass-producing solid-state batteries and supplies them to Daimler for its electric buses. The company is now developing a passenger-car battery that could possibly be of interest to Volkswagen. Blue Solutions also recently signed a deal with the world's largest manufacturer of electronic components, Foxconn, to jointly develop a solid-state battery ecosystem for electric two-wheelers.
Reuters reported that Volkswagen confirmed that its venture with QuantumScape was still "on track." Reports of the automaker talking with a solid-state battery maker other than QuantumScape, however, seem like a threat to the latter.
Why QuantumScape remains a risky stock
Solid-state battery technology has strong potential, and electric-vehicle (EV) enthusiasts believe it could be a game changer. This is because the batteries reportedly charge faster, have greater energy density, a longer cycle life, and are cheaper and safer than the traditional lithium-ion batteries that currently power most EVs.
QuantumScape's prototype cells have shown promise so far in testing, but the company has faced constant delays in developing and commercializing them. Its venture with Volkswagen originally listed 2018 as the expected year of commercialization.
With QuantumScape still unsure when it'll be ready to commercialize and mass-produce solid-state batteries and more companies including automakers also taking a foray into the technology, Volkswagen doesn't want to be left behind. QuantumScape investors should watch out for any development on this front. Although QuantumScape has contracts with other original equipment manufacturers (OEMs) and automakers, Volkswagen has also invested more than $300 million in the company so far.
QuantumScape already remains a speculative stock, given that it could be years away from generating its first revenue. Today's report only adds another element of risk to the stock.
