This Solid-State Battery Stock Skyrockets on Landmark Deal

Key Points

• QuantumScape develops solid-state lithium-metal batteries for EVs and is nearing the production stage after years of development.
• QuantumScape stock surged over 40% after signing a new larger manufacturing agreement with PowerCo, a Volkswagen subsidiary. The surge was driven by an 11% short float.
• The long-awaited production of its solid-state EV batteries draws closer as PowerCo ramps up its licensing agreement to outfit 1 million EVs annually with QuantumScape batteries.

Solid-state battery technology company QuantumScape Co. NYSE: QS stock awakened, jumping nearly 46% on news of a new agreement with PowerCo, a subsidiary of Volkswagen AG (OTCMKTS: VWAGY). QuantumScape received much hype and fanfare in 2021 regarding its solid-state lithium-metal battery technology backed by Volkswagen and Microsoft Co. NASDAQ: MSFT Co-Founder Bill Gates. Quantumscape shares surged as high as $132.73 on Dec. 21, 2021, marking it as one of the most successful special purpose acquisition companies (SPACs) to hit the market despite not having an actual commercial battery ready for production until 2025.

QuantumScape operates in the auto/tires/trucks sector, competing with other EV battery makers like Tesla Inc. NASDAQ: TSLA, NIO Inc. NYSE: NIO, and Enovix Co. NASDAQ: ENVX.

What are Solid-State Batteries?

Most electric vehicles (EVs) currently use lithium-ion batteries. When charging and discharging, these batteries use a liquid electrolyte to shuttle lithium ions between the positive electron cathode and negative electron anode through the porous polymer separator. The energy density of lithium-ion batteries is 250 to 700 watt-hours per liter (Wh/L), which determines the driving range per full charge. Charging time can take hours, depending on the battery size and charging infrastructure. There are safety concerns that accompany flammable liquid electrolytes if the battery is ever damaged or overheated.

Solid-state lithium-metal batteries only contain a positive cathode and a solid-state ceramic separator, replacing the porous separator in a conventional lithium-ion battery. It is manufactured without an anode, replacing it with an electrical contact. As the battery is charged, the lithium travels through the non-porous ceramic solid-state separator. Once through, it deposits between the separator and electric contact, forming a pure metallic lithium anode, which allows the energy to be stored in a smaller volume, which enables a higher energy density. The commercial goal is 800 to 1,000 Wh/L. This results in a greater range for EVs, a 15-minute fast charge versus hours, and safer operation since there are no flammable liquid components.

Solid-State Versus Lithium-Ion Batteries

The standard test for charging traditional lithium-ion EV batteries involves cycling through three-hour charging periods followed by discharging. For their demonstration, they used 1C for a full charge and discharge in one hour each. Under these conditions, QuantumScape single-layer cells showed over 1,000 cycles to a median of 90% energy retention of 300,000 miles. The goal is to combine several dozen single-layer unit cells into a multilayer cell and achieve a target density of 1,000 Wh/L by eliminating the anode host material. This also reduces the cost of the battery.

QuantumScape Solid-State Test Results

In its test results released on Jan. 3, 2024, PowerCo confirmed that the QuantumScape 24-layer solid-state cell completed over 1,000 charging cycles while still having 95% of its capacity. This results in a worldwide harmonized light vehicle (WLTP) range of 500 to 600 km and an additional 500,000 km. In essence, the solid-state battery could add 500,000 km of driving without any noticeable loss of range.

PowerCo CEO Frank Blome commented, “These are very encouraging results that impressively underpin the potential of the solid-state cell. The final result of this development could be a battery cell that enables long ranges, can be charged super-quickly and practically does not age. We are convinced of the solid-state cell and are continuing to work at full speed with our partner QuantumScape towards series production."

QuantumScape and PowerCo Landmark Agreement

In a press release on July 11, 2024, PowerCo announced a landmark agreement to industrialize QuantumScape’s solid-state lithium-metal batteries. PowerCo has a non-exclusive license to manufacture up to 40 gigawatt-hours (GWh) annually using QuantumScape's technology, with the option to expand to 80 GWh. This is enough to outfit 1 million EVs per year. The agreement supersedes any earlier agreements. It enables QuantumScape to license its technology and PowerCo to industrialize and manufacture the batteries using its extensive manufacturing facilities and workforce to bring production to scale. The agreement is a testament to the technology.

QuantumScape CEO Dr. Siva Sivaram commented, "Combining our cutting-edge technology with PowerCo's expertise in manufacturing and industrialization, this deal establishes a blueprint for a capital-light business approach and positions us at the forefront of energy storage innovation. Working closely with PowerCo as our first customer will help us accelerate the commercialization and adoption of these game-changing batteries together."

QS Forms a Falling Wedge Breakout

The daily candlestick chart on QS indicated a falling wedge breakout. This is comprised of a descending upper trendline converging with a descending lower trendline meeting at an apex point. QS exploded higher on the news of its expanded licensing agreement with PowerCo but continued to rise even higher as the long-awaited production draws closer. The daily relative strength index (RSI) surged to the 86-band on the news. Pullback support levels are at $7.29, $6.36, $5.72, and $4.99.

QuantumScape analyst ratings and price targets are at MarketBeat.