Editor's note: A previous version of this article incorrectly stated that General Motors and QuantumScape are partners. This has been corrected.
QuantumScape (QS +2.91%) stock stumbled in Monday morning trading after The Wall Street Journal reported that General Motors (GM 0.40%) is getting cold feet about the EV revolution.
Laws that promote electric vehicles and "emissions standards that are not aligned with market realities pose a serious threat to our business by undermining consumer choice and vehicle affordability," warned GM in an email to employees. Now, the automaker is lobbying to get EV-friendly legislation reversed.
GM's 180 has QuantumScape investors concerned: Shares of the battery research start-up were down by 13.7% as of 10:45 a.m. ET.
Image source: Getty Images.
What's GM up to?
The Wall Street Journal reported that GM "is racing to reverse the nation's most aggressive EV mandate" in California, and urging employees to call U.S. senators and press them to eliminate the long-established federal waiver that permits California to set its own emission standards. The Clean Air Act of 1970 also gives other states the right to adopt California's environmental standards, and numerous states have done so. Of particular concern to GM is a 2022 California law that will ban the sale of new gasoline-powered cars and trucks in the state by 2035.
GM itself has already failed to make good on its promise to build 400,000 EVs by mid-2024, and it's postponing the development of an electric Buick and the construction of an EV truck factory. Viewed in combination with the lobbying efforts, none of this sounds like good news for QuantumScape's prospects as it works to develop, and then sell, solid-state lithium-metal batteries for use in EVs.
Is QuantumScape stock a sell?
Mind you, just because GM has tapped the brakes on its EV plans doesn't mean it's abandoning them. A breakthrough in solid-state battery technology could even help to make EVs popular again, helping QuantumScape. But the battery specialist doesn't have time to waste. Its cash reserves are down to $860 million, and it has been burning through cash at a rate of $330 million a year.
For QuantumScape, faster EV adoption would be better. The more car companies like GM turn against the EV market, the worse for this company's prospects.
