QuantumScape, a developer of solid-state lithium metal batteries, recently released its fourth-quarter report. As of the report on February 12, the company had not generated any revenue, as it has yet to commercialize its batteries. QuantumScape’s net loss increased from $110 million to $115 million year-over-year, translating to a loss of $0.22 per share, though this was still $0.01 better than the consensus forecast.
For the entire fiscal year, QuantumScape’s net loss expanded from $430 million to $475 million. Despite the seemingly bleak outlook for a company with an enterprise value of $2.2 billion, QuantumScape has provided more specific updates on its commercialization initiatives.
The company aspires to disrupt the lithium-ion battery market with its solid-state batteries, which use solid electrolytes instead of the traditional liquid ones. These batteries are denser, can withstand higher temperatures, and charge faster than their liquid counterparts, though they also pose challenges in terms of cost and technological complexity. While solid-state batteries have primarily been produced for smaller devices, QuantumScape, in collaboration with Volkswagen, is working on scaling them for electric vehicles (EVs). Their QSE-5 batteries boast an energy density exceeding 800 watt hours per liter (Wh/L) and can charge from 10% to 80% in under 15 minutes on a Level 3 charger, compared to the 300-700 Wh/L density and 20 minutes to an hour charge time for traditional lithium-ion batteries.
QuantumScape’s aim to revolutionize the battery industry faces significant competition from large automakers such as Toyota, Hyundai, and Nio, as well as smaller companies like Blue Solutions, each striving to commercialize solid-state batteries.
QuantumScape plans to begin commercializing its batteries in 2024, having already shipped initial QSE-5 samples to select automakers in the latter half of 2024. However, mass production remains a distant goal. The company intends to shift to a more advanced Cobra separator process by 2025, which is expected to enhance cell reliability and production yields. In 2026, QuantumScape aims to launch its first batteries to an undisclosed prospective customer, likely Volkswagen.
Moreover, QuantumScape plans to adopt an asset-light business model by licensing its designs to other automakers rather than mass-producing all its batteries. Already collaborating with PowerCo, QuantumScape’s strategic approach could help manage development costs as it progresses.
Analysts project QuantumScape’s revenue to reach $4.28 billion by 2026, with a net loss of $439 million. With an enterprise value of $2.2 billion, the company appears attractively valued at 0.5 times next year’s sales. However, QuantumScape has increased its share count by approximately 50% since going public in November 2020, with further dilutions likely through secondary offerings and significant stock-based compensation expenses. Insider trading trends over the past year also indicate a lack of confidence that the stock will return to its previous high levels.
In summary, while QuantumScape holds potential for future growth, it remains a highly speculative investment. Investors might consider buying a modest amount of stock at current levels but should wait for clearer signs of progress in battery commercialization before increasing their stake.
