QuantumScape has regained the spotlight, thanks to its stock, which has gained momentum over the past few months with consistent advancements in its solid-state battery technology. The company plans to transform electric vehicle batteries to provide higher energy density, have a more significant charge, and is safer than current lithium-ion batteries. Its alliance with Volkswagen, which over the decades has poured in a lot of investments, and also sponsors its efforts through PowerCo, has continued to be the pivot in its strategic approach.
The recent smack to this relationship gives not only credibility, but also financial benefits as it gives license payments that extend the cash runway of QuantumScape into 2029. However, the company is yet to make regular revenue. Losses are enormous, which to be fair is normal for an enterprise in its research and development stage. The absence of income is dangerous even with about $800-million worth of liquid assets, particularly in the case of schedule slippage or cost impacts increase.
There is a chance of shareholder dilution when the company faces the necessity of extra funds. Meanwhile, the next generation battery competition is steep with major established automakers and start-ups continuing development of their own technologies.
The primary concern that investors would have is whether the company would deliver on its claims and become commercially viable beyond the laboratory. The field testing is slated to occur in 2026, so investors will have to remain patient and wait out the volatility.
With the increasing number of people all around the world taking an interest in electric vehicles, the potential upside of the technology has huge value in case it is proven and utilised by automakers. However, up until revenues start coming in, the shares are mostly unanchored in a financial manner, with prices moving on the basis of milestones and market psychology.
Based on its long-term perspective and high-risk tolerance, QuantumScape presents an opportunity that can be a game-changer for EV batteries and investors. To more conservative investors, it might be a better idea to wait until the company shows that they are making sustainable successes in commercialization.
