QuantumScape has long talked a big game about its potential, and rightfully so — it’s pursuing a holy grail in the field of battery-materials science that has eluded researchers for decades.
The solid-state battery technology the startup has been working on for electric vehicles promises much greater range and 15-minute charge times. After its spinoff from Stanford University in 2010 and as it was going public a decade later, automakers lined up and investors took interest.
But in the years since its merger with a blank-check firm, QuantumScape’s big ambitions of scaling a big battery breakthrough have run into some grounding manufacturing realities.
The company is now planning to find customers in the consumer-electronics sector as it takes longer to commercialize automotive-grade cells.
It’s a well-worn path for battery startups struggling to meet the rigorous, years-long qualification process required to become an auto supplier.
But do not call it a pivot — EVs are still the top priority, CEO Jagdeep Singh told Bloomberg this week.
“We are not pivoting to anything. We remain focused on automotive as the primary market,” Singh said in an interview. “From an investor standpoint, why would you not? If your product can serve additional markets, why would you not want to take advantage of that?”
QuantumScape is the fifth startup for Singh, who became fascinated with energy storage while thinking about the batteries in his Tesla Roadster.
Bill Gates and venture capitalists Vinod Khosla and John Doerr were early investors. Tesla co-founder JB Straubel sits on the board.
And Volkswagen, the company’s biggest shareholder, signed an agreement to build a battery plant with QuantumScape technology if it proves viable.
All that star-studded backing contributed to QuantumScape briefly being valued as a $50 billion company in December of 2020, and the startup raised about $1.3 billion in two trips to the equity market. But it also attracted the attention of short sellers, skeptics from the battery world and a class-action lawsuit from investors who were burned on the way down.
The shares closed Thursday at $6.03, a tiny fraction of the $131.67 peak reached in December of 2020.
Why the hype in the first place? All lithium ion batteries have the same basic components: two electrodes (a cathode and an anode), an electrolyte that helps shuttle the charge between them, and a permeable membrane called a separator that keeps the anode and cathode from touching.
Solid-state batteries replace the conventional liquid electrolyte and the separator, which are both flammable, with a solid separator made of ceramic, glass or polymers. This innovation, if proven to work beyond the lab and reproduced flawlessly hundreds of thousands of times in a factory, could make EV batteries safer, smaller and faster-charging.
The flawless manufacturing bit is where QuantumScape has run into some trouble. And it’s far from alone.
Incumbents including Panasonic and LG Energy Solution spend months churning out useless scrap from their machinery before making a cell good enough to be placed in an automobile.
That is absolutely normal and is part of why battery manufacturing has historically been a low-margin business with high barriers to entry.
Unlike other solid-state startups who stuck to “drop-in” tech that could easily slide into existing production lines, QuantumScape is trying to build a new product. It invented a proprietary cell format, which means it also has to design custom tooling to make that cell, then wait months to have the equipment delivered, then begin the grueling process of testing the equipment and working out the kinks.
This is the Silicon Valley moonshot approach Singh is a deep believer in — if it’s not really risky and really hard, it’s not worth your time.
That plan seemed to be working until July of last year, when executives disclosed in their second-quarter earnings report that there were contamination problems in the separator films the company was producing at its manufacturing site in California.
A month prior, Celina Mikolajczak, a Panasonic veteran who was leading QuantumScape’s manufacturing efforts, abruptly resigned after little more than a year. The company cited “differing management styles.”
In its third-quarter report, QuantumScape said it signed a new agreement with VW that removed the time constraint for site selection of their joint venture pilot facility planned for the U.S. or Germany.
While the companies said they remain committed to bringing vehicles equipped with solid-state lithium metal battery technology to market as early as practicable, QuantumScape also started putting more emphasis on the consumer electronics market in its investor letters.
VW said it continues to work with QuantumScape to scale production of solid-state batteries and acknowledges that it’s a “challenging step.”