QuantumScape (QS 5.69%) stock had a monster one-day trading session in the first week of the year when it shot up by more than 40% on Jan. 3. Shares of the solid-state battery technology start-up, however, gave all of that back and then some, and are now down 6% for the year. QuantumScape stock has fallen by a double-digit percentage this week, and was trading 14% lower for Friday's session as of 10:15 a.m. ET.
QuantumScape's early January surge came after its largest partner and investor reported hugely encouraging testing data for some of its batteries, but since then, news has come out that this same partner is reportedly looking other solid-state battery manufacturers to partner with. That report was big enough to send QuantumScape stock tumbling over the last few days, wiping out all of its gains from early 2024.
QuantumScape's battery cells are promising
While most electric vehicles (EVs) currently run on lithium-ion batteries, QuantumScape is building solid-state batteries and has already shipped prototypes to its original equipment manufacturer (OEM) partners for testing. These partners include German automaker Volkswagen (VWAGY 1.26%), which has also invested more than $300 million in QuantumScape over the course of their 11-year partnership.
In its most recent quarterly earnings report, QuantumScape claimed that one of its prospective customers' labs had reported remarkable results of more than "1,000 full cycle equivalents with over 95% discharge energy retention." Those results surpassed QuantumScape's own targets, and the stock surged around that time.
A couple of weeks ago, Volkswagen's battery company, PowerCo, confirmed those results, stated that QuantumScape's solid-state cell had significantly exceeded industry standard targets, and said it was working at "full speed" with QuantumScape "toward series production." QuantumScape stock, unsurprisingly, went parabolic after the announcement.
This week, however, Reuters reported that Volkswagen is pursuing alternatives, and said the automaker could strike a deal with France's solid-state battery company, Blue Solutions, in the coming months. The thing is, while QuantumScape's battery cells are still in the testing phase and there's no knowing when it'll secure its first customer to commercialize and mass-produce batteries, Blue Solutions is already supplying batteries to companies like Daimler for electric buses. The company is now developing a passenger car battery, which is perhaps what Volkswagen is interested in.
What would have to occur for QuantumScape stock to rally
Make no mistake: The Reuters report does not in any way suggest that QuantumScape's partnership with Volkswagen is at risk. However, competition is always a real threat, and it doesn't sound good for QuantumScape's long-term prospects that its largest partner and potential customer is hunting for alternative suppliers.
However, unlike most EV sector start-ups, QuantumScape has the money it needs to fund its operations for some years -- it ended the third quarter with $1.1 billion in liquidity, which management believes should be enough to support the business through 2026.
Everything, including where QuantumScape stock heads from here, depends on its progress toward a marketable EV battery, and the pace of that progress has fallen well short of its early estimates. Management originally stated 2018 as the expected year of commercialization of its technology in its joint venture agreement with Volkswagen. It should come as no surprise, then, that Volkswagen is looking for potential alternatives or a backup.
