Why QuantumScape investors are still waiting for new EV batteries
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QuantumScape’s solid-state battery research lab.
QuantumScape
In recent years the electric vehicle market has witnessed a number of notable stock markets debuts, but it is battery start ups that have stood out. QuantumScape’sEven by EV Stock standards, the first weeks of trading were extraordinary.
QuantumScape was established in 2010 and went public through a merger of a special-purpose acquisition firm, SPAC. Its stock soared 49% in its first day of trading in November 2020 and had surged to a high of $131.67 by Dec. 22 — a gain of over 400% in less than a month.
QuantumScape soared to $54Billion in valuation thanks to investor excitement about its solid-state batteries technology. Solid-state battery technology is a way of eliminating the liquid electrolyte or flammable that was found in current lithium-ion cells. The auto industry giant also enjoyed the run. VolkswagenBill Gates also owned a share of the company or was one of its major investors.
However, the excitement surrounding the company has now ceased. The stock lost about 92% on its high.
QuantumScape stands by its lofty 2020 claims and maintains that it is on the right track for production of its batteries in just a few more years. The company still faces long and costly testing. Wall Street still waits, as the competition is increasing.
While investors might have left, the auto sector is watching. QuantumScape reported that the company now has three partners from the automotive industry who are willing to help test the batteries. These carmakers have not been named.
A small piece of flexible ceramic
You can see why car manufacturers are interested in solid state battery technology. Although lithium-ion battery technology is generally reliable today, their weight, size and charging times are not ideal for electric cars. Even though EV fires can be rare, they are often intense and hard to extinguish. This is partly because lithium-ion battery batteries can last for many hours.
QuantumScape’s batteries are “solid state”, as they do not require the gel electrolyte or liquid found in existing batteries. Solid-state batteries are lighter and smaller than lithium-ion packs of comparable capacity. They also have a lower chance of catching fire.
QuantumScape’s CEO Jagdeep Singh made the promise that the company would have a stable solid-state batteries at scale in the second half of 2020. These are just a few of his claims during an interview. livestreamedPresentation of test results from an early stage:
- QuantumScape’s battery can recharge in as little as 15 minutes. That is about half of the time that it takes to charge other lithium-ion batteries.
- The company’s battery-powered EVs would offer up to 80% more range and weight than current lithium-ion batteries.
- QuantumScape battery cells are “capable to last hundreds of thousands miles” at a variety of temperatures including minus 22 F.
In a QuantumScape press statement, Stan Whittingham, who was co-inventor the lithium-ion batteries and won the Nobel Prize for Chemistry 2019, stated that “If QuantumScape is able to get this technology into production in mass quantities, it has the potential of transforming the industry.”
This seemed too good to be true. For decades solid-state battery researchers had tried to make them work, but without any success.
One of the biggest challenges for inventors was finding an appropriate solution. Such batteries were prone to failure because of dendrites — needle-like structures that form inside, often in a matter of weeks, that can short circuit them and end their life.
QuantumScape has patented a flexible ceramic material separator that can resist dendrites, but not catch fire. Solid-state batteries, if it functions as expected, should last for at least as long as traditional lithium-ion batteries while still delivering all of the benefits.
QuantumScape still has a long way to go before it can mass-produce its batteries. However, it appears that its technology works in laboratory testing.
In that 2020 livestream test that sent the company’s stock soaring, QuantumScape said a tiny prototype of its battery held up for over 800 cycles of charging and draining — roughly the number that an EV’s battery would endure over its lifetime.
However, the test battery wasn’t a fully-sized version and it was slow to scale up to an electric vehicle battery.
QuantumScape successfully repeated the 800-cycle test with scaled up batteries last year. An earlier round of testing showed that a larger version made it through 500 cycles. The company still needs to complete a number of development rounds before it can produce a fully-sized prototype.
Road map of the sample
The steps needed to get QuantumScape’s batteries ready for on-the-road use will take at least two years — and likely more — to complete.
The company will have to test and build an “A-sample” battery once the existing prototype has passed the 800-cycle testing threshold. However, it is still far from the size that the company plans to mass produce.
CNBC interviewed Singh in April. Volkswagen and its automotive partners will have a free sample this year.
Second, there’s the “B” sample, which is identical to its predecessor and was manufactured on a prototype line. The tooling used on this prototype line was similar, but smaller, to those that QuantumScape will use on its final full-speed production line.
Singh explained that A samples are used by customers to confirm the ability of the battery to function as expected. Singh explained that the purpose of the “B sample” is for customers to take this battery to test their cars.
Last, the final step, would be to make a prototype (a C-sample) for the full-scale assembly lines. Singh indicated that QuantumScape will deliver C samples within 2024-2025.
Singh explained that the cars in test will still not be available for production. They’ll instead be an important milestone in the history of both the automaker and company partners. The C-sample batteries can be used to build test vehicles that will then go into production.
These rounds of production, development and testing require substantial amounts of money.
Singh said he is confident that QuantumScape has enough cash — about $1.3 billion as of the end of March — to be able to deliver those C sample batteries to its automotive partners for testing. However, it will have to raise additional money in order to create a plant large enough to support automakers on a scale.
It may be up against other companies.
Toyota has said it’s working to develop its own solid-state batteries in-house, and at least one other start-up — Colorado-based Solid PowerSupported by BMWAnd Ford Motor — is on track to begin manufacturing its own solid-state versionsAround the same moment.
Singh feels that it would be difficult to raise enough cash to start a factory, given the economic conditions. However, Singh is confident in his ability to convince investors to take control of test cars powered by QuantumScape Batteries.
Singh stated that “the good news about U.S. capital market is that, if you can show that you have something tangible and that there is a large market opportunity for your product or service, then you will find a lot capital.”
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