The Time for QuantumScape to Strike is Right Now

While electric vehicle proponents love to serve word salads to justify their arguments that an EV transition is ready right now, the reality is that the sector won’t achieve mainstream integration until the infrastructure is available. And that’s the beauty of QuanumScape (NYSE:QS). Through advanced technologies, its solid-state battery could dramatically improve range, making the net integration proposition more palatable, thus bolstering QS stock.

A hand holds a phone and the screen shows the QuantumScape logo
Source: rafapress / Shutterstock

If you think about, one of the reasons why people — even from households that can afford EVs — haven’t made the switch to electric transportation is that with combustion cars, they don’t have to think about anything. For instance, if you want to travel from one state to another with a combustion car, you always know that if you drive far enough, you’ll come across a gas station.

The same cannot be said for EV charging stations, which is why QS stock represents an important cog in the bigger picture. By raising the capacity of what an average EV can do, QuantumScape can accelerate the transition to electric. Essentially, as the infrastructure is being built out, longer-range EVs can hit the road with fewer worries for drivers.

And believe me, those on the fence about EVs have many anxieties and pain points to assess. One of them is the present hassle involved with public charging. Beyond the different charging connectors that manufacturers may deploy, charging stations vary on their rapidity of deployment. Simply put, some stations can charge much quicker than others.

That’s a whole new range of considerations that combustion car drivers have never before considered. Thus, if QuantumScape could release a viable solid-state battery, it would be a gamechanger not only for QS stock but for the entire EV industry.

Rising Inflation Has Other Ideas for QS Stock

On so many levels, even if you weren’t investing in QuantumScape, chances are you want the company to succeed. The convenience factor has long been a headwind for the transition to EVs. But with solid-state batteries, the reality of mainstream integration has never been closer, a driving catalyst for QS stock.

Unfortunately, progress in a laboratory environment doesn’t always translate to real-world viability. Indeed, solid-state batteries are not exactly unprecedented technology. It’s just that no one has ever built one on the size and scale necessary to power EVs. Should QuantumScape be the first, QS stock will almost surely fly.

However, based on what’s happening in the world, the time for the company to deliver is right now — or the sooner the better. With consumer inflation skyrocketing, everything from grocery products to EVs will rise in cost. Therefore, solid-state batteries (which in theory should be cheaper due to lower material usage) would be incredibly relevant.

Even more critically, Axios pointed out in December last year that the trend for declining EV battery costs had reversed. Instead, batteries are now getting more expensive, thus having a direct impact on EV prices. This in turn threatens the broader goals of going electric; namely, transitioning away from fossil fuels and helping to combat climate change.

What’s the cause of this spike in cost? “Soaring costs for minerals and other raw materials could push the average price of a lithium-ion battery pack to $135 per kilowatt-hour in 2022, according to researchers at BloombergNEF who specialize in studying the energy transition.”

Because these projections came out last year, it’s possible that the actual cost per battery could be even higher. Remember, the January data for the consumer price index caught many analysts by surprise.

Without a Launch Date, It’s Speculative

Making matters more troubling for QS stock is that Toyota (NYSE:TM) announced that its first car to utilize solid-state battery technology is scheduled to go live by 2025. If so, QuantumScape could be looking at a similar timeframe to release its battery for commercial use.

By then, it’s possible — though hardly guaranteed — that commodity prices could normalize, which could mean that standard battery technology would be cheaper. The thing is, if the standard stuff becomes remarkably cheap, then QuantumScape would have to deliver one extraordinary product for companies to justify the return on investment.

That’s why it’s better for QS stock if the underlying company could make a breakthrough right now. However, that might be asking too much, which makes shares a risky proposition.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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.

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