QuantumScape (NYSE:QS) stock has had an interesting ride.
The company has spent a dozen years trying to build a high-capacity, room temperature, solid battery.
It’s the biggest unmet promise of the Electric Vehicle industry. Teardown expert Sandy Munro says such a battery would be “the kiss of death for gasoline and diesel.”
Solid batteries would not catch on fire, they would increase energy density eight-fold, and could be built without toxic materials.
If Quantumscape can engineer and produce at scale it could become the most valuable battery company in the world. It would easily be worth 100 times more than its present $2.5 billion market cap.
But those are a lot of ifs.
A Closer Look at QS Stock
QS stock has been teasing the industry with its progress since 2020. Then, Tesla co-founder (and now board member) J.B. Straubel called its design “a major breakthrough.”
This sent the stock as high as $114 per share that December. It’s now being offered at about $6.
The company’s latest letter to shareholders claims it’s close to a commercial product. It has a design that can deliver 380-500 Watt-hours per kilogram of weight (WH/kg). Quantumscape says it’s four times better than the design used by Tesla (NASDAQ:TSLA).
But it’s still not delivering a commercial product, and now that money costs money it must get to market mainly with cash already invested by shareholders. The report says it has about $1 billion of that, and that it burned through $62 million in operations during the first quarter. A cash flow analysis says QuantumScape can run 2.6 years before it needs revenue.
But you don’t just measure time in cash. You measure it against the competition.
In China, Nio (NYSE:NIO) claims it could have a solid battery on the market this summer. A start-up called WeLion claims to have made its first production model last fall. It’s not entirely solid state. It’s a hybrid solid-liquid design that can hold 360 Wh/kg. In practice that would be a range of 600 miles for the Nio E7 on a single charge.
CATL, which has over one-third of the current battery market, claims its latest “semi-solid” design has a capacity of 500 Wh/Kg and could go into production this year. This is enough density to be used in a passenger airplane, CATL claims.
Science hasn’t stopped working the problem, although going from a lab to production takes years. UC San Diego scientists have shown that it’s at the electrolyte interface that electron movement is breaking down. Lithium may still have some tricks up its sleeve. Porsche (OTCMKTS:POAHY) is testing a lithium-silicon design and new packing designed to reduce the parts list.
The Bottom Line
If Quantumscape can escape the lab, there will be plenty of capital to go into production. A better battery has become the climate industry’s Holy Grail. Quantumscape is America’s leader on the bleeding edge of this effort. Its connections to Tesla mean success will get a hearing.
But that’s no guarantee. CATL has a big lead in scaling its battery technology. No company, and no country, wants to be left behind in the race to build a high-density, solid battery that can be charged and recharged without losing range.
Quantumscape remains a speculative stock, but its importance assures it a hearing from both industry and government when it does finally deliver something.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.