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While QS stock could be transformative, it really could go either way
By Josh Enomoto, InvestorPlace Contributor Feb 10, 2021, 5:16 am EST
While the promise of electric vehicles has many investors excited, the economic reality is that EVs remain far off from challenging combustion cars with present technology. That’s what makes QuantumScape (NYSE:QS) so exciting. If the company is successful in forwarding a viable solid-state battery, QS stock could be mind-blowingly transformative.
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Indeed, despite the many efforts of EV evangelists bullying their support for their favorite platform utilizing both fair and incredibly biased bad-faith arguments, the bottom line is that debate is a waste of time. For EVs to truly go mainstream and replace combustion cars, they must appeal to broad consumer needs. Unfortunately, this is where the EV narrative hits a snag.
Pundit after pundit note that there’s no such thing as range anxiety when you consider the holistic benefits of EVs and the burgeoning infrastructure to accommodate them. Whatever. The overriding truth is that for potential consumers, range anxiety remains the top concern. Further, we must be intellectually honest: EVs may work very well for certain drivers but not for all.
I often hear arguments on the blogosphere that 200 miles of range is plenty good enough — no one’s driving from one far-off city to another. But the problem with such bad-faith reasoning is that no one person can account for the driving habits of everyone else. If you happen to drive long distances — and use a trailer to boot — the relative lack of “refueling” stations compared to combustion cars is a problem.
But that’s the beauty of QS stock. With the underlying SSB technology, EVs can drive further thanks to increased energy density. In addition, the smaller physical profile of the solid state battery theoretically translates to lower overall costs — a massive concern for every consumer.
On paper, QS stock seems the perfect investment. It could be. But the challenge is that we’re dealing with ifs.
QS Stock Is Aspirational, Whatever That May Mean
Despite much of my family being involved in the technology sector in one form or another, I personally hate it. So I’m not the best person to give advice about anything tech related. However, I will do my best to summarize the SSB concept:
- Fundamentally, solid state batteries utilize solid inner conductive materials that replace liquid or gel-based materials found in traditional lithium-ion batteries, thereby packing in more energy density.
- Because of the higher density, SSBs can pack more punch in a smaller footprint, reducing material costs and improving EV efficiency through lighter vehicle weight.
- Theoretically, SSBs are more resilient than traditional batteries, facilitating faster charging. They’re also safer and more reliable because of fewer parts resulting in less vulnerability points.
Again, this all sounds like a win-win for QS stock. And it would be if it weren’t for the pesky fact that — as QuantumScape’s educational videos note — many manufacturers have attempted to build viable SSBs but have failed. Of course, the pitch for QS is that it has the magic formula for success.
However, it’s important to note what we mean by failure. Several companies, including Toyota (NYSE:TM) and Mercedes-Benz, have experimented with and developed SSBs. But if you drill into the details, you’ll find that these companies offer SSBs that are practical for certain attributes but are devastatingly flawed for others.
For example, Car and Driver noted that Toyota made some encouraging progress for its SSBs, which it will showcase in the Summer Olympics if the games don’t get canceled. However, the problem here is that the SSBs can’t charge frequently before they fail.
For a company that values reliability, that’s not a good look.
Interesting But Risky
I mention all this because SSBs are already here — they’re not a new concept. What would be the new concept is if a company manages to bring every key attribute of SSBs — namely energy density, reliability and lower cost — under one umbrella.
That’s where the failure in SSBs lie. Toyota and others have succeeded in actualizing some benefits of the solid-state platform. But without others, it’s tough to sell SSBs to the mass market. I mean, imagine if you did have the greatest SSB in the world but it cost well higher than traditional lithium-ion batteries – scientifically, it would be a tremendous achievement, but economically, it would fall apart.
Still, QS stock is intriguing because of its sharp discount relative to its peak price. I don’t think a speculative position with “dumb money” is a bad move. Perhaps I might even join some of you speculators.
But we’ve got to be realistic about QS stock. You’re banking on QuantumScape delivering perhaps the greatest scientific and economic achievement of the 21st century ahead of other established automotive and technology firms. It’s possible but this narrative is also incredibly risky.