QuantumScape promised a revolutionary EV battery. Here’s why investors are still waiting

A solid-state battery development lab for QuantumScape.

QuantumScape

The electric vehicle space has had a handful of impressive stock market debuts in recent years, but battery startup QuantumScape’s first few weeks of trading have been remarkable even by EV stock standards.

QuantumScape, which was founded in 2010, went public through a merger with a special purpose acquisition company, or SPAC. Its stock soared 49% on its first day of trading in November 2020 and had hit a high of $131.67 on December 22, a gain of more than 400% in less than a month.

That run gave QuantumScape a staggering $54 billion valuation, fueled by investor enthusiasm for the company’s solid-state battery technology, so called because it removes flammable liquid or electrolyte. gel found in today’s lithium-ion batteries. Plus, it didn’t hurt that car giant Volkswagen was a major investor, or that Bill Gates also took a stake.

But the hype that surrounded the company at the end of 2020 appears to have all but dried up, with the once-hot stock losing around 92% of its value from that all-time high.

QuantumScape stands by the lofty claims it made in 2020 and says its batteries are still on track to enter production in a few years. But the company faces a long road of cash-intensive testing. The competition is only intensifying and Wall Street is still waiting.

Investors may have moved on, but the auto industry is still watching: In addition to Volkswagen, QuantumScape said it now has three other automaker partners committed to testing the company’s batteries. So far, these automakers are not named.

A small piece of flexible ceramic

It’s not hard to see why automakers are so interested in solid-state battery technology. Today’s lithium-ion batteries are generally quite reliable, but their size, weight and recharge time make them less than ideal for electric vehicles. And while EV fires are rare, they tend to be intense and difficult to extinguish, in part because lithium-ion batteries can burn for hours.

The batteries that QuantumScape is working to develop are called “solid state” because they don’t need the liquid or gel electrolyte found inside existing batteries. A solid-state battery can be smaller and lighter than a lithium-ion battery of similar capacity, and the lack of liquid inside makes them less likely to catch fire.

In December 2020, QuantumScape CEO Jagdeep Singh promised a reliable, large-scale solid-state battery by mid-decade. Here are some of the statements he made during a live presentation of the first test results:

  • QuantumScape’s batteries can recharge from zero to 80% capacity in just 15 minutes, about half the time required by most lithium-ion batteries for electric vehicles.
  • An electric vehicle using the company’s batteries would have up to 80% more range than a vehicle powered by current lithium-ion batteries, with a similar weight.
  • QuantumScape’s battery cells were “capable of lasting hundreds of thousands of miles” in a wide range of temperatures, including down to minus 22 degrees Fahrenheit.

“If QuantumScape can take this technology to mass production, it has the potential to transform the industry,” said Stan Whittingham, co-inventor of the lithium-ion battery and winner of the 2019 Nobel Prize in Chemistry, in a QuantumScape press release.

It seemed almost too good to be true. Researchers have been tinkering with solid-state batteries for decades, without success.

The inventors faced a major challenge. These batteries were susceptible to failure due to dendrites – needle-like structures that form inside, often within weeks, that can short circuit them and end their life.

QuantumScape’s key innovation is a separator made of a proprietary flexible ceramic material that resists dendrites and cannot ignite. If it works as expected, solid-state batteries should be able to survive as long as a typical lithium-ion battery while retaining all of the expected benefits.

QuantumScape is still at least a few years away from being able to mass-produce its batteries. But in lab tests, his technology appears to be working.

In this 2020 livestream test that sent the company’s stock skyrocketing, QuantumScape said a tiny prototype of its battery held up for more than 800 charge and drain cycles — roughly the number that an EV battery would endure over its lifetime.

But that test battery was a scaled-down version, and sizing up to a battery ready for use in electric vehicles was a slow process.

QuantumScape was able to repeat this 800 cycle test twice last year with slightly larger batteries. A larger passed 500 cycles in a series of tests earlier this year. But the company is still a few development cycles away from achieving a full-scale prototype.

“Example” roadmap

The steps needed to prepare QuantumScape’s batteries for use on the road will take at least two years – and likely longer – to complete.

Once the current prototype hits the 800-cycle test threshold, the company will need to build and test an “A sample” battery that’s nearly full-size, but still isn’t quite what it expects. to mass produce.

Singh told CNBC in an April interview that the A sample product will be ready this year to send to Volkswagen and the company’s other automotive partners for testing.

Next is “Sample B”, similar to its predecessor but made on a prototype assembly line, with tooling similar, but smaller and simpler, to the machines QuantumScape plans to use on its eventual full-scale production line. speed.

“The purpose of Sample A is for the customer to be able to validate that the battery can actually perform as it is intended to perform,” Singh said. “The purpose of Sample B is to take this battery and use it to make test cars.”

The last step would be a final prototype, a C-sample, to be manufactured for the full-scale assembly line. Singh said he currently expects QuantumScape to deliver C samples in 2024 or 2025.

But even those early test cars won’t be ready for the road, Singh said. Instead, they will be a milestone for the company and its automaker partners. Subsequently, test cars built using these C-sample batteries will be ready for production.

These development, production and test cycles will require significant cash.

Singh said he was confident QuantumScape had enough cash on hand — about $1.3 billion at the end of March — to be able to deliver those sample C batteries to its automotive partners for testing. But it will take raising more money to build a plant big enough to supply large-scale automakers.

Until then, there may be competition.

Toyota said it is working to develop its own solid-state batteries in-house, and at least one other start-up — Colorado-based Solid Power, backed by BMW and Ford Motor — is on track to do so. start manufacturing its own solid-state batteries. versions around the same time.

Raising the amount of cash needed for a factory would be tough to do in the current economic environment, but Singh thinks raising that cash won’t be difficult once investors have had a chance to drive test vehicles powered by QuantumScape batteries.

“The good news about US financial markets is that if you can demonstrate that you have something real and the market opportunity is really big, then there’s a lot of capital out there,” Singh said.

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