The battery is the most important component of an electric vehicle (EV) as it determines how far the car will go, how long it takes to charge, and ultimately its price. On that front, the most ambitious prospect is in the solid-state battery, which promises to offer a high energy density, fast charging times, and performance that is unencumbered by different temperatures like current 'wet' batteries. QuantumScape (NYSE: QS) was the first to make its market debut via a SPAC merger last November, but a new entrant, Solid Power, will be going public via its own SPAC later this year. As both companies compete to be first to market, which is the better investment, QuantumScape or Solid Power?
Of its nearly 200 patents on solid-state batteries, none is more important than QuantumScape's card-sized ceramic separator; this component can function in temperatures so low that they would shut down traditional batteries and can be a powerful moat against competitors. In laboratory testing, the company has concluded that its batteries will reach an 80% charge in 12 minutes. This factor, along with high energy density, long cycle life, and wide temperature range operation is all met by QuantumScape and it is the first time all four were achieved by any solid-state battery.
As these are the hardest requirements to meet simultaneously in a solid-state battery, I'd say QuantumScape's results are very positive indeed. No doubt that results like these are what inspired investments from the likes of Bill Gates and Volkswagen. The world's largest car company has thus far invested $300 million in QuantumScape and expects to be equipping its EVs with its solid-state batteries by 2025. And although demand is highest in the EV sector for a better battery, other industries like smartphones, tablets, and even airlines can benefit from the company's tech. The total addressable market (TAM) for solid-state batteries is estimated to be roughly $230 billion by 2030.
This all sounds wonderful on paper but the fact of the matter is that nobody has ever built a solid-state battery and certainly not to scale. QuantumScape has been in business for 11 years and has to not only mass-produce solid-state batteries but also build a new factory for the process as existing factories don't meet the exacting standards of solid-state production. And finally, competition cannot be discounted as it comes from giants like Apple (new EV and battery by 2024), Tesla (new factories and battery material mining), and LG Chem, all companies with significantly more resources and cash than QuantumScape.
Solid Power is not yet trading on the stock market but you can purchase shares of Decarbonization Plus Acquisition III (NASDAQ: DCRC), which will convert to Solid Power (SLDP) stock upon SPAC merger later this year. The thing that makes this company so special is the fact that it is closer to production than any other competitor. In fact, it's already making 20 ampere-hours (Ah) batteries on a pilot production line and expects to begin pilot production of its full-scale 100 Ah batteries in 2022. How?
Well, it turns out that Solid Power's tech can make use of existing factories, processes, and equipment for traditional lithium-ion batteries (with very little adjustment) to manufacture its solid-state batteries. This gives the company a huge cost advantage not to mention a clear path to being first to market. The company is backed by Ford and BMW, who will no doubt be early customers for Solid Power's batteries. The merger is expected to provide the company with over $600 million in cash, which it can use while it waits to go to market and continue to make breakthroughs in solid-state tech development. On this front, Solid Power batteries can achieve a 90% charge in 10 minutes and costs can be reduced from the current $142/kWh to $85/kWh.
The bears still say that this is unproven tech that the company has been working on for 9 years since its founding. And like other SPAC companies (Nikola), Solid Power can be exaggerating its claims.
I love bleeding-edge technology but only if it's proven. Neither of these companies has a viable product yet so I would be wary about taking a position. That said, I wouldn't mind using a tiny percentage of my portfolio reserved for risky investments and buying shares of Solid Power (or DCRC) as it is closer to market than any other company in the sector and is roughly 60% less expensive than QuantumScape.
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