Although electric vehicles capture most of the headlines, the real science underlining this innovation is the battery. The biggest push right now in this sector is the development of the solid-state battery. That’s where Kensington Capital Acquisition (NYSE:KCAC) comes into play. Management claims to have discovered the breakthrough to take EVs to the next level, boosting interest in Kensington Capital stock.
If so, Kensington, which plans to initiate a reverse merger with QuantumScape via the special purpose acquisition company (SPAC) process, would be an almost miraculous organization. Essentially, the solid-state battery is the holy grail of the EV battery developmental competition. Many automakers are throwing everything they have at this technology.
But if KCAC has the keys, you can be darn sure that Kensington Capital stock will fly to the moon.
To understand why KCAC has this tremendous upside potential, it’s worth considering the difference between today’s lithium-ion battery and the (hopefully) upcoming solid-state variety. For that, Techcrunch contributor Kirsten Korosec does an excellent job succinctly explaining the distinct factors:
Electric vehicles on the road today are equipped with lithium-ion batteries. A battery contains two electrodes. There’s an anode (negative) on one side and a cathode (positive) on the other. An electrolyte sits in the middle and acts as the courier that moves ions between the electrodes when charging and discharging. Solid-state batteries use a solid electrolyte and not a liquid or gel-based electrolyte found in lithium-ion batteries.
Developers claim that solid electrolytes have greater energy density, which translates into squeezing more range out of a smaller and lighter battery. Solid electrolytes also are supposed to be better at thermal management, reducing the risk of fire and the reliance on the kinds of cooling systems found in today’s EVs.
Put another way, solid-state batteries fulfill the two Ps in PPP, which are physical spacing and performance. As Korosec explains, with the greater energy density of this new battery tech, automakers can have more design and capacity freedom. In addition, the greater range and faster charging capabilities finally makes EVs more realistic as a road to mainstream integration.
But the last, price, is where separate merely great companies from unicorns. This brings up a question: Is Kensington Capital stock a unicorn investment?
Kensington Capital Stock Is Pursuing Scientific Perfection
Arguably, before Tesla (NASDAQ:TSLA) came along, not too many folks appreciated Nikola Tesla the scientist. Today, you can’t hear enough about this reclusive genius and his ultimate goal of providing free energy for the world.
Although he never got to finish what would have been a paradigm-shattering invention, future generations of scientists were inspired by his work. In modern times, it’s reasonable to say that throughout much of the world, technology has achieved two-thirds of Tesla’s original vision: we have power and it is physically distributed (almost) everywhere in a convenient format.
But it’s not quite what Tesla had in mind. You see, he wanted free (accessible) energy for everyone to enjoy. The last time I checked my utility bill, it wasn’t free (nor was it cheap).
And that’s the irony behind Tesla the company’s EVs. On the surface, they feature the convenient physical dimensions of a regular car with overall performance metrics (i.e. acceleration, range, charging time, etc.) that are roughly on par with combustion-engine cars. But the problem here too is price.
EVs are not nearly as accessible as they should be. Tesla’s Elon Musk admitted as such; hence, Tesla’s own search for a groundbreaking battery that would truly allow anyone with a job to buy an EV.
For me, this is the sticking point regarding Kensington Capital stock. In order to really take KCAC to the moon – and to justify some of the hype train behind this company – its solid-state battery has got to address all three Ps.
Interestingly, QuantumScape CEO Jagdeep Singh also signaled that his company must hit the P trifecta. In an interview with Fast Company, Singh said, “The improvement you’re seeing in range is not coming from fundamental improvements in battery technology… What’s happening is people are [installing] bigger and bigger packs.”
Exactly. The bullish case for Kensington Capital stock revolves around its underlying battery’s holistic accessibility component. Right now, it’s possible to ramp up overall performance by sacrificing physical spacing (by making the car heavier through brute-force integration) and raising the price.
The thing is, anybody can go the brute-force way. But the real genius is the company that can implement these technologies at a cheaper price. In other words, doing more with less. So far, the offering of everything has basically been a scientific impossibility.
In my last write-up regarding Kensington Capital stock, I mentioned that you shouldn’t be afraid of being skeptical. Having reanalyzed the case for KCAC, I still feel the same way.
Well, maybe not quite the same. Admittedly, when I consider the upside if QuantumScape does deliver its solid-state unicorn battery, I can’t help but feel temptation. After all, if it comes through, KCAC would be a contender for greatest stock in the universe.
But “if” is a nasty mistress. Unfortunately, the problem with solid-state batteries is that current working models fail after repeated charging and discharging. That’s something that both the Faraday Institute and Toyota (NYSE:TM) have discovered.
Of course, it’s possible that QuantumScape has discovered something that these and other renowned institutions failed to see. But let’s face it – this prospect is highly unlikely. Therefore, Kensington Capital stock is an almost-perfect high-risk, high-reward venture.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.