The electric vehicle industry is still in its early days. Even though practically every auto manufacturer is developing more and better EVs every year, fewer than one in 10 cars sold in the U.S. is fully electric.

One company could change all that. It's not a flashy new automaker. It's the company developing a key technology that could make EVs much more preferable and affordable to own over a traditional combustion engine vehicle.

QuantumScape (QS 5.69%) is developing solid-state battery technology that could unlock a ton of growth in the EV industry. The stock price is down 95% from its all-time high in 2021, but it's closer than ever to bringing its vision for the future into reality. Here's why it's a great opportunity to buy QuantumScape stock right now.

A man leaning against a car looking at his phone as it charges.

Image source: Getty Images.

Why solid-state batteries?

Solid-state batteries represent a step-change in existing lithium-ion battery technology currently used in electric vehicles. Without going too deep into the details, here are four of the biggest improvements solid-state batteries offer over existing technology.

  1. Increased density. Solids are more dense than liquids, and denser batteries can produce more energy in the same amount of space. Considering the space restrictions in a car, that means manufacturers will be able to make vehicles with longer driving ranges.
  2. Improved safety. The liquid electrolyte solution used in current EV batteries is flammable, requiring additional safety components to ensure things don't overheat and start fires. A solid-state battery requires fewer safety components, reducing manufacturing costs and improving performance.
  3. Faster charging. QuantumScape has successfully charged its battery prototype from 10% to 80% in just 15 minutes. By comparison, leading liquid-electrolyte batteries take 30 minutes for the same charge.
  4. Longer lifespans. Solid-state batteries don't degrade as quickly as existing batteries. That means drivers can use their cars longer without having to pay for an expensive battery replacement.

The push toward commercialization

QuantumScape is the leading developer of solid-state batteries for EVs, but it's not without competition.

Several other manufacturers are working on the technology, including publicly traded Solid Power. But Solid Power is targeting commercialization in 2028. QuantumScape is planning to ship its first commercial product this year.

QuantumScape's first commercial product is called QSE-5. In its fourth-quarter letter to shareholders, management wrote, "Our goal is to begin low volume QSE-5 prototype production in 2024, with higher volumes targeted in 2025."

To help facilitate the production ramp-up, QuantumScape hired Dr. Siva Sivaram as president in the third quarter. Along with the fourth-quarter report, the company named him CEO, with founder Jagdeep Singh staying on as chairman of the board of directors. Sivaram has a background in scaling the manufacturing of solid-state and magnetic data storage solutions at Western Digital and Sandisk.

Sivaram will oversee the development of new heat treatment processes, which will enable QuantumScape to scale its manufacturing. Management says it successfully deployed its new Raptor process last quarter, which can provide three times the capacity of its previous process.

The next iteration of its manufacturing process, called Cobra, will significantly improve on Raptor in terms of throughput, energy efficiency, and equipment footprint. It also removes additional steps, reducing costs and eliminating variability. Management is working to get it online as soon as possible to support higher volume production in 2025.

Of course, ramping up production without a revenue source requires significant capital. The company expects capital expenditures between $70 million and $120 million in 2024. There's plenty of liquidity on the balance sheet, though. It has $142.5 million in cash and an additional $928.3 million in marketable securities. As such, management extended its projected cash runway into the second half of 2026, two quarters beyond its previous estimate. That leaves plenty of time to ramp up QSE-5 production and start generating revenue.

While investing in QuantumScape is risky because of the technical challenges of scaling production of its battery technology, it's closer than any other company to producing a commercially viable product. And as automakers look to adopt solid-state batteries for the next generation of EVs, QuantumScape could play a huge role in that process. It's worth putting a small amount of money into the company with such high growth potential.