The shares of battery maker QuantumScape (NYSE:QS) rocketed higher earlier this month on news that its solid-state battery can be charged over 1,000 times without degrading. Unfortunately for the long-term outlook of QS stock, this characteristic, while certainly positive, does not address the main “pain points” facing drivers and automakers.
Moreover, QS has at least two competitors that appear to be chronologically ahead of it and may have superior products, and the firm will not be profitable for many years. Given all of these issues, I advise investors to sell QuantumScape stock at this point.
Failing to Solve the Main “Pain Points”
As everyone with even rudimentary knowledge about the problems facing EVs knows, the three main issues preventing many consumers from purchasing EVs are range anxiety, charging time, and the high prices of most EVs.
Range anxiety, of course, refers to the relatively low number of miles that EVs can travel on a single charge. This problem is compounded by a shortage of EV chargers in the U.S. and the relatively long amount of time that it takes to charge EVs.
Judging by the recent reports on tests of QuantumScape’s battery by Volkswagen (OTC:VWAGY), there’s no concrete indication that the batteries solve any of these issues.
The head of Volkswagen’s EV battery subsidiary, Frank Blome, did say that the QS batteries “could (ultimately allow) long ranges (and) be charged super-quickly.” But Blome’s statement suggests that QuantumScape’s batteries have not yet come close to achieving these goals.
So although QuantumScape’s batteries are supposed to be able to eventually attain 400-500 miles of range in under 15 minutes, there’s no indication that the firm has achieved this goal or come close to doing so.
As a result, although I’m sure that the tremendous endurance of the company’s batteries would please automakers and consumers, I don’t believe that this characteristic alone will make its batteries successful.
At Least Two Tough Competitors
Batteries made by Israel-based StoreDot can reportedly deliver 100 miles of range after just five minutes of charging. Moreover, Vietnam-based EV startup VinFast (NASDAQ:VFS) reportedly intends to start using StoreDot’s batteries “by 2025,” while another EV startup, Polestar (NASDAQ:PSNY), is slated to deploy StoreDot’s batteries in an EV prototype this year.
Meanwhile, BMW (OTC:BMWYY) reportedly plans to test battery cells made by U.S.-based Solid Power (NASDAQ:SLDP) in an on-road prototype EV by the end of this year.
According to The Denver Post, “Solid Power has shown on smaller cells it has produced that the range could increase at least twofold and charging times could be reduced to as little as 15 minutes or less for an 80% charge.”
Years Before Commercialization
In a December note to investors, British bank HSBC reported that QS is not expected to generate “meaningful revenue until 2027 or positive free cash flow until 2031,” Seeking Alpha reported.
Moreover, the bank expects the company’s cash burn to climb significantly going forward, and it predicts that the firm will need to raise additional cash “by late 2025.”
The Bottom Line on QS Stock
There’s no concrete indication that QuantumScape’s batteries will solve the EV sector’s main pain points, and the firm seems to be behind two of its competitors chronologically.
Moreover, QS stock has a rather high market capitalization of $4.3 billion at this point.
On the date of publication, Larry Ramer 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.
