3 Things Every QuantumScape Investor Needs to Know

QuantumScape (NYSE: QS) is not exactly a household name. There's a good chance that some of its current shareholders know little about this company, either, other than that it's working on better batteries for electric vehicles.

So, here's a rundown of three key things potential investors will want to know about this company and the stock.

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1. QuantumScape's lithium-based EV batteries really are "next-generation" tech

Plenty of companies say they're working on game-changing technologies. Not all of these upgrades actually end up being game-changing, though. QuantumScape's probably will be. By putting the liquid lithium found in most conventional EV batteries into a solid-state form, this company's batteries are safer, longer-lasting, and perhaps most importantly, add driving range.

QuantumScape says its solid-state batteries can add between 15% and 40% more driving distance compared to comparable batteries currently powering most modern electric vehicles.

2. There are tons of competitors in this space

It sounds great -- this improvement may be enough to get most hesitant consumers over the "range anxiety" hump.

Except QuantumScape is hardly alone in its quest for a better lithium-based EV battery. EV giant BYD Company is as well. Toyota is developing solid-state batteries as well, along with China's CATL and Panasonic, just to name a few.

And all of these outfits expect to begin commercial mass production of their batteries around the same time QuantumScape intends to. That's sometime in 2027. The company can't afford any developmental delays if it wants to capture market share before bigger players claim theirs.

3. QuantumScape is highly dependent on its partnership with Volkswagen

Finally, if you're wondering why investors remain interested in this unprofitable $7 billion company that will face stiff competition once it's ready to mass-produce solid-state EV batteries, carmaker Volkswagen (OTC: VWAGY) gets a huge amount of the credit. Not only is its subsidiary PowerCo working closely with QuantumScape to build better batteries for its own and others' EVs, Volkswagen is an investor as well as a customer.

Volkswagen purchased $100 million worth of stock back in 2018, and it has more than doubled that stake in the meantime, while also providing QuantumScape cash awards for reaching developmental milestones.

Don't read too much bullishness into the arrangement, though. What are sizable sums for QuantumScape are pittances for Volkswagen, which turned nearly $400 billion worth of revenue into a profit of more than $20 billion last year alone.

Volkswagen is also working with other solid-state battery-development partners like Umicore, 24M Technologies, Redwood Materials, and Gotion High-Tech, and doesn't necessarily need QuantumScape to see its EV battery ambitions all the way through to their end. Volkswagen also doesn't need QuantumScape to thrive as a company or for QuantumScape stock to perform well to do so; it only wants access to QuantumScape's tech.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends BYD Company and Volkswagen Ag. The Motley Fool has a disclosure policy.