One of the reasons why it’s unhealthy to be overly zealous about any particular belief system is that the system will eventually encounter an ideologically untenable scenario. Such is the case for QuantumScape (NYSE:QS), the research and development specialist of solid-state batteries (SSBs). On the surface, QS stock is extremely relevant because the underlying company could make a breakthrough in SSB technologies, thus eventually engendering superior performance. But QuantumScape encountered an unexpected geopolitical conundrum, thereby risking its relevance.
If you’ve followed the ebb and flow of QS stock, you’ll know that not everything has gone the way the SSB specialist’s leadership team had hoped. However, as InvestorPlace contributor Will Ashworth pointed out, QuantumScape CEO Jagdeep Singh mentioned that his company “could use iron-based cathodes — instead of nickel-based — with its lithium-metal anodes, delivering superior energy efficiency.”
Per the head executive, “[W]e’re cathode-agnostic with our architecture, so we can switch from nickel to iron … ‘When you couple iron-based cathodes with our lithium-metal anode, you get a 50% increase’ in energy density,” thereby making iron “a ‘viable alternative’ to nickel-based cathodes.” The science checks out if you’re interested in conducting further research.
But the issue with QS stock is that the iron-replacing-nickel aspiration is a smoke-and-mirrors act. So long as lithium remains a component of battery technology — SSB or otherwise — the narrative for QuantumScape and electric vehicles in general will be troubled. Mainly, that’s because lithium mining imposes a severe impact on the environment, particularly in the area of excessive water usage.
The problem of water has long been a contentious issue with EVs; believe me, I’m not bringing up anything groundbreaking here. However, it wasn’t that pressing of an issue because many consumers still drove combustion cars due to relatively cheap petroleum prices. Now, that circumstance has changed in large part because of Russia and its unnecessary invasion of Ukraine.
Granted, inflationary pressures helped set the foundation of high gasoline prices. But the Russians undeniably caused a worldwide accelerated pivot toward alternative energy solutions. Presumably, then, EV demand will swing higher, which theoretically should lift QS stock. So then, what’s the problem?
The acceleration would be a decisive boon for QS stock if the infrastructure was holistically ready for explosive EV demand. However, note again that QuantumScape isn’t talking about replacing lithium with iron. It’s talking about replacing nickel with iron. Unfortunately, so long as lithium itself remains in the picture, its increased demand will put a strain on global freshwater supplies.
The world is running out of usable clean water, it’s not running out of oil. But the western world is trying to pivot away from oil in a bid to economically suffocate Russia. However, if the answer is more EVs, that is going to kill the most precious resource we have. So if QuantumScape succeeds, humanity might suffer for it.
No wonder QS stock is having such a rough time in the market.
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 InvestorPlace.com Publishing Guidelines.
