QuantumScape Is Down 96% From Its High. Is 2027 Finally the Solid-State Battery Year?

QuantumScape (NASDAQ: QS), a developer of solid-state batteries, went public through a merger with a special purpose acquisition company (SPAC) on Nov. 27, 2020. Its stock opened at $24.80 on its first day and closed at an all-time high of $131.67 on Dec. 22, 2020.

Before going public, QuantumScape claimed it could commercialize its first batteries by 2024, and that its revenue would soar from $14 million in 2024 to $275 million in 2026. But as of this writing, it hasn't commercialized any batteries nor generated any meaningful revenue yet.

That's why QuantumScape's stock plummeted 96% to its current price of about $5. Will it bounce back next year as it makes more progress toward launching its first batteries?

Image source: Getty Images.

Why did QuantumScape miss its original targets?

QuantumScape's solid-state batteries have higher charging capacities, shorter charging times, and better thermal resistance than liquid-based lithium-ion batteries. But they're also more expensive and challenging to manufacture than their lithium-ion counterparts.

A major technological hurdle for QuantumScape is the mass production of its flexible ceramic separator, which prevents dendrites (lithium fibers) from short-circuiting the battery. Last year, it replaced its older Raptor separator process with its new Cobra separator process to improve its cell reliability, equipment productivity, and total yields. That upgrade helped it ramp up its production of high-volume samples of its QSE-5 batteries for electric vehicle makers.

The QSE-5, which was co-developed with Volkswagen (OTC:VWAP.Y), has an energy density of 844 Wh/L (watt hours per liter) and can be charged from 10% to 80% in 12 minutes. Most lithium-ion batteries have an average density of 300-700 Wh/L with an average charging time of 20 minutes to an hour. Therefore, the QSE-5 could be a major upgrade for EVs.

QuantumScape originally planned to manufacture its own batteries. But in 2024, it abandoned that strategy and instead agreed to license its technology to Volkswagen's PowerCo subsidiary and other automakers. That shift would enable the company to operate a higher-margin, asset-light licensing business, but it's still nowhere near commercializing those designs.

When will QuantumScape finally commercialize its designs?

During its second-quarter report on July 22, QuantumScape said its battery designs wouldn't achieve commercial readiness until 2029. At the same time, more automakers and start-ups are joining the race to mass-produce their own solid-state batteries. If QuantumScape can't keep up with those competitors, its business could fizzle out before it commercializes its first batteries.

That's a murky outlook for an unprofitable, pre-revenue company that's already valued at $3.4 billion. So while solid-state batteries might attract more attention next year, investors shouldn't expect QuantumScape's stock to soar back toward its all-time highs.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.