QuantumScape surges on solid-state EV battery: Hype or home run?

QuantumScape Co. NYSE: QS has been developing the next-generation solid-state lithium-metal batteries for electric vehicles (EV). The Auto/tires/trucks sector company has been developing and testing its technology since 2022 and announced its first solid-state battery endurance test results with its partner Volkswagen AG OTCMKTS: VWAGY. 

It sent shares rocketing 43% higher. Incidentally, Toyota Motors Co. NYSE: TM plans to roll out its solid-state batteries in 2027. QuantumScape plans to begin small-scale production in 2024 and commercial launch in 2025 to 2026. 

A cautionary tale for SPAC investors

QuantumScape was once a wildly successful special purpose acquisition company (SPAC) story when it hit $132.73 on December 21, 2020, but turned into a cautionary tale for SPAC mania bag holders when it sank to a low of $4.99 on November 1, 2023. QuantumScape hasn't produced a commercial battery yet and expects to launch one in 2025. 

However, it has powerful backers, including Bill Gates, Kleiner Perkins, Vanguard, BlackRock, and Volkswagen. It has partnered with major automakers, including Ford Motor Co. NYSE: F and Stellantis AG NYSE: STLA. Volkswagen is the largest automaker in the world by sales, reaching $299.5 billion.

Solid-state versus lithium-ion batteries 

Lithium-ion batteries use a liquid electrolyte, allowing lithium-ions to travel between the cathode and anode during the charging and discharging cycle. The liquidity electrolytes are flammable and can pose safety risks. Solid-state batteries have no liquidity electrolytes. Instead, it uses a solid ceramic or polymer electrolyte, eliminating the fire risk and enabling higher operating temperatures.

Solid-state batteries have more layers with denser packaging of ions in the solid electrolyte, resulting in significantly more energy per unit volume than lithium-ion batteries. Solid-state batteries can charge much faster in minutes versus hours since the solid electrolyte allows for more rapid movement of lithium ions. 

Solid-state batteries have a longer lifespan as they are more stable and degrade much less. Solid-state batteries will be more expensive, costing up to 3x that of lithium-ion, as the manufacturing process is more complex and requires specialized materials. Those costs will eventually be driven down as they become more mainstream. Check out the sector heatmap on MarketBeat.

Powerco battery test results

On January 3, 2024, PowerCo, the battery company owned by Volkswagen Group, confirmed that QuantumScape's 24-layer solid-state cell (SSC) passed its first endurance test. It had exceeded requirements. Its SSC achieved over 1,000 charging cycles while retaining more than 95% capacity. 

This is impressive compared to current lithium-ion batteries, experiencing a significant loss of around 80% of original capacity after 500 to 700 charging cycles. 

At 1,000 charging cycles, a typical lithium-ion EV battery would experience a significant drop towards 60% to 70% of its original capacity. Lithium-ion batteries experience noticeable decreases in power and range as they degrade, eventually costing owners thousands of dollars to replace the batteries, which can also create environmental concerns with discarded batteries. 

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PowerCo CEO comments

This test indicates that QuantumScape's SSC lasts significantly longer, which may double the lifespan of an EV while lowering maintenance costs. It means that an EV with a range of 500 to 600 kilometers could get over 500,000 kilometers out of the EV and still operate at more than 95% capacity.

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 continue working at full speed with our partner QuantumScape towards series production."

QuantumScape analyst ratings and price targets are at MarketBeat. QuantumScape peers and competitor stocks can be found with the MarketBeat stock screener.

Daily death cross reversal attempt

The daily candlestick chart for QS illustrates a potential death cross reversal pattern. QS formed a daily market structure low (MSL) buy trigger on the $6.83 breakout after shares bounced off the daily 50-period moving average (MA), which has risen to $6.84. QS shares surged 43% on the press release of its solid-state battery test results, which formed a higher MSL trigger at $10.03. 

Shares peaked and have been coming down with the relative strength index (RSI) testing the 50-band. The 50-period MA has been steadily sloping toward the 200-period MA at $7.18. If the 50-period MA crosses up through the 200-period MA, the Death Cross would reverse into a golden cross breakout. Pullback support levels are at $6.83, $6.40, $5.76 and $5.25.