Insights

3 Reasons to Buy QuantumScape, and 1 Reason to Sell

Top companies, from automakers to parts suppliers, are working hard to fulfill the growing demand for electric vehicles (EVs). At the same time, companies are continuously improving their EV offerings in terms of performance, range they can go on a single charge, and cost.
Solid-state battery technology company QuantumScape (NYSE: QS) is working on batteries that will help EVs go longer distances on a single charge and take less time to recharge, while costing less than the batteries currently in use. Obviously, there is a lot of interest in how the company is progressing. Let’s look at QuantumScape’s progress and plans, and discuss whether the stock is a buy.
Progressing well on its plans
In its latest quarterly results released last month, QuantumScape updated investors on its progress. The company has gotten encouraging results for its 16-layer cells. Cells for use in automotive applications require several dozen layers, and QuantumScape is progressively increasing layers to test energy retention and cycling behavior with each addition. Furthermore, it feels confident about increasing layers without materially affecting the cells’ performance.
Image source: Getty Images.

In the first quarter, QuantumScape’s 10-layer cells were tested successfully by one of its automotive customers. QuantumScape aims to deliver its initial sample cells with dozens of layers to at least one customer in 2022. The company’s progress is one of the top reasons to buy its stock.
Lower charging time, longer range
Another reason to buy QuantumScape stock is the company’s solid-state battery technology, which could be a game-changer in the electric vehicle industry.
Image source: QuantumScape.

The batteries currently available in the market need to trade off between energy density and power. So, an EV using a battery with high energy density can go longer on a single charge, but it takes more time to charge. This is depicted by the “Top-selling long-range EV” point on the chart above. Although this battery has a high energy density of more than 700 Wh/L (watt-hours per liter), it takes around 35 minutes to charge from 10% to 80%.
Alternatively, batteries can charge faster, but they will have lower energy density, meaning the vehicle will go less distance on a single charge. This is shown as “Leading high-performance EV” on the chart.
QuantumScape projects that its solid-state lithium-metal batteries will have much higher energy density and much lower recharge time than the battery options available on the market today. Additionally, QuantumScape’s cells don’t have an anode, helping them to be more cost-effective than conventional batteries with anodes.
High interest from potential buyers
The promising technology has obviously received high interest from potential buyers, including leading automakers. QuantumScape has partnered with three of the world’s top 10 automakers by revenue. The third partnership was announced in March and could potentially lead to a joint-venture facility with up to 50 GWh (gigawatt-hours) in annual cell production capacity.
Although these partnerships hinge on QuantumScape successfully meeting its technical targets, what they still do is provide the company with ready buyers once it succeeds in meeting the agreed milestones.
A challenging task
Overall, QuantumScape is progressing well on its plans of developing the next-generation batteries. It has immense interest from potential buyers for its cells.
However, it is important to note that solid-state batteries have been under research for years, but companies haven’t been able to successfully commercialize them so far. That’s because there are several technical and engineering hurdles in their development.
QuantumScape seems to be progressing well, but whether it succeeds in commercializing the technology or not remains to be seen. The company expects to produce sample cells for sale to customers by 2024-2025. Until it does that, however, investing in the stock is an endeavor suitable only for investors with an abundant appetite for risk.
Rekha Khandelwal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

Top companies, from automakers to parts suppliers, are working hard to fulfill the growing demand for electric vehicles (EVs). At the same time, companies are continuously improving their EV offerings in terms of performance, range they can go on a single charge, and cost.

Solid-state battery technology company QuantumScape (NYSE: QS) is working on batteries that will help EVs go longer distances on a single charge and take less time to recharge, while costing less than the batteries currently in use. Obviously, there is a lot of interest in how the company is progressing. Let’s look at QuantumScape’s progress and plans, and discuss whether the stock is a buy.

Progressing well on its plans

In its latest quarterly results released last month, QuantumScape updated investors on its progress. The company has gotten encouraging results for its 16-layer cells. Cells for use in automotive applications require several dozen layers, and QuantumScape is progressively increasing layers to test energy retention and cycling behavior with each addition. Furthermore, it feels confident about increasing layers without materially affecting the cells’ performance.

Image source: Getty Images.

In the first quarter, QuantumScape’s 10-layer cells were tested successfully by one of its automotive customers. QuantumScape aims to deliver its initial sample cells with dozens of layers to at least one customer in 2022. The company’s progress is one of the top reasons to buy its stock.

Lower charging time, longer range

Another reason to buy QuantumScape stock is the company’s solid-state battery technology, which could be a game-changer in the electric vehicle industry.

Image source: QuantumScape.

The batteries currently available in the market need to trade off between energy density and power. So, an EV using a battery with high energy density can go longer on a single charge, but it takes more time to charge. This is depicted by the “Top-selling long-range EV” point on the chart above. Although this battery has a high energy density of more than 700 Wh/L (watt-hours per liter), it takes around 35 minutes to charge from 10% to 80%.

Alternatively, batteries can charge faster, but they will have lower energy density, meaning the vehicle will go less distance on a single charge. This is shown as “Leading high-performance EV” on the chart.

QuantumScape projects that its solid-state lithium-metal batteries will have much higher energy density and much lower recharge time than the battery options available on the market today. Additionally, QuantumScape’s cells don’t have an anode, helping them to be more cost-effective than conventional batteries with anodes.

High interest from potential buyers

The promising technology has obviously received high interest from potential buyers, including leading automakers. QuantumScape has partnered with three of the world’s top 10 automakers by revenue. The third partnership was announced in March and could potentially lead to a joint-venture facility with up to 50 GWh (gigawatt-hours) in annual cell production capacity.

Although these partnerships hinge on QuantumScape successfully meeting its technical targets, what they still do is provide the company with ready buyers once it succeeds in meeting the agreed milestones.

A challenging task

Overall, QuantumScape is progressing well on its plans of developing the next-generation batteries. It has immense interest from potential buyers for its cells.

However, it is important to note that solid-state batteries have been under research for years, but companies haven’t been able to successfully commercialize them so far. That’s because there are several technical and engineering hurdles in their development.

QuantumScape seems to be progressing well, but whether it succeeds in commercializing the technology or not remains to be seen. The company expects to produce sample cells for sale to customers by 2024-2025. Until it does that, however, investing in the stock is an endeavor suitable only for investors with an abundant appetite for risk.

Rekha Khandelwal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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