Leading automakers across the world are ramping up their electric vehicle production. Governments' and environmental bodies' focus on reducing carbon emissions, increased customer awareness, and falling EV costs are some of the key factors contributing to the increasing popularity of electric vehicles.
One key component that can accelerate the ongoing transformation is the cost and efficiency of batteries used to power EVs. This is where QuantumScape (QS -9.06%) could play a crucial role. Let's see why the company's work in advancing the battery technology is promising, and where it may stand five years down the line.
A solid future
One of the major reasons restricting a faster growth of EVs is the limitations of current batteries. The lithium-ion batteries currently in use face certain constraints. They need to be recharged frequently and provide limited range. Secondly, they take a lot of time to get recharged. That's a big drawback compared to gasoline-powered vehicles that can be re-fueled in minutes.
Moreover, the current batteries may cause fire in certain conditions such as overcharging or accidents. Finally, the battery costs, though have fallen significantly over the years, are still high for mass adoption.
Image source: Getty Images.
QuantumScape claims to have developed a proprietary solid-state separator, used in batteries, that will allow replacing currently used carbon or silicon anode with lithium-metal anode. Its solid-state batteries are more energy dense, and so can provide a much longer range without the need to recharge. They also can be recharged faster compared to the current batteries and can be produced at a lower cost.
While this sounds promising, it's to be noted that a lot of research work remains to be done before the technology can be commercialized. QuantumScape's batteries are so far only tested in labs. The company hasn't also yet produced multi-layer stacks needed in automobiles. There are several other technical factors that the company needs to work on before its product is ready for use.
When will QuantumScape start production?
Despite uncertainties, if things go as per QuantumScape's plans, the company could start pilot production of its batteries in 2024. Five years from now, the company expects to have a production capacity of 6 GWh (gigawatt hours), that would be enough to support around 60,000 vehicles. It still might not achieve positive EBITDA by then, which it expects could take one more year from there.
In its latest quarterly letter, QuantumScape shared encouraging results relating to its four-layer cells. The company continues to work on increasing the layers, as needed in automobiles. It also re-iterated its expectations of starting commercial production in 2024-2025 timeframe.
On the flip side, QuantumScape could fail to achieve the required breakthrough in the solid-state technology. Things should become clearer in nearly three years, when it expects to start pilot production. In either case, much of the current uncertainty surrounding the company's prospects should be gone five years from now.
The battery stock is promising, but risky
QuantumScape has all it possibly needs to succeed. Top names from auto industry are supporting the company. It also has Volkswagen (VWAGY -0.64%) as an investor and a ready buyer of its products when they are made. At the same time, it has a formidable task at hand.
Solid-state battery technology is being researched since years. Yet, no company has been able to successfully commercialize it so far. No one can say for sure whether QuantumScape will be able to accomplish this feat. Moreover, one of the several other companies researching the technology may bring it to market before QuantumScape could.
For the above reasons, though QuantumScape stock is promising, it is risky too. Investors need to keep that in consideration while making an investment decision.
