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‘Holy grail’ battery breakthrough for VW partner QuantumScape to have ripple effect

Volkswagen Group’s US battery partner has made a potentially crucial breakthrough for the electric car industry with a new development in its solid-state lithium battery technology.

QuantumScape Corp (NYSE:QS) said it is now able to produce battery cells with multiple layers, a key development that should enable it to scale up its batteries from the lab towards mass production.

“While there is still a lot of work to be done and we could encounter new challenges as we increase our layer count, this is an incredibly important result, and we are excited to have this so early in the year,” said chief executive Jagdeep Singh in a statement alongside the Silicon Valley-based outfit’s quarterly results overnight.

The company has already shown its battery cell can charge up to 80% of capacity in 15 minutes, which industry experts say would be a game-changer if it can be manufactured at mass volumes.

Shares in the company are up 6% in pre-market trading to US$53.79.

Analyst Daniel Ives at Wedbush Securities said the development of a multilayer solid state battery is a “significant technical breakthrough that could have a ripple impact across the EV industry”.

Ives added that it was “a major step forward on accomplishing the holy grail of EV battery technology in a solid state form”.

QuantumScape, which was spun out of Stanford University a decade ago, floated by backing into a SPAC, Kensington Capital Acquisition Corp, late in 2020 with an enterprise value of US$3.3bn.

It has formed a joint venture with VW to produce solid-state battery cells, starting in 2024 with batteries for the German carmaker’s electric vehicles, and eventually for other manufacturers.

VW is investing at least US$300mln to QuantumScape, with other investors including Bill Gates’ Breakthrough Energy Ventures, VW’s Chinese partner Shanghai Auto and tyre-maker Continental.

“Taking a step back,” said Ives, “QS is the poster child stock for the EV global demand story, with EV batteries front and center. QS is a pure play on next generation battery technology with breakthroughs in the EV battery front that could change the industry down the road given the innovation behind solid state batteries.”

He added: “With the EV market potentially a five trillion dollar market over the next decade, pure play EV battery names like QS are a focus for the EV bulls and with backers like Bill Gates and VW its a legitimate contender in this EV battery arms race in our opinion as seen with last night’s announcement. In a nutshell, QS is a solid state battery play which could be viewed as an alternative to lithium-ion and could significantly lower the cost of electric vehicles down the road and change the economics behind an EV vehicle.”

Ives suggested that, with Apple Inc (NASDAQ:AAPL) active in the EV “dating game” in recent weeks and months, VW would be an attractive candidate for the iPhone maker’s transition in the auto industry, made stronger by the QuantumScape angle.

“We continue to strongly believe that VW is a top candidate for an Apple EV partnership/JV given the company’s modular factory footprint as well as the key QuantumScape ownership. This combination makes VW on paper a major contender for Cupertino on the EV front.”

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