QuantumScape Is Coming for Tesla — The Volkswagen-Backed Company’s Latest Decision to Go Public
By: Walid Ao
Tags: Energy, Innovation, Technology, Finance, Electric Vehicles

QuantumScape Is Coming for Tesla — The Volkswagen-Backed Company’s Latest Decision to Go Public

QuantumScape’s IPO will bring us one step closer to a world with electric cars only.

Photo by Michael Marais on Unsplash

QuantumScape, the solid-state-battery manufacturer, is going public, making them the first U.S. battery manufacturer to go public in a decade. Their technology can dramatically change our way of life.

When Steve Jobs unveiled the iPhone in 2007, we immediately knew that the multi touch screen was something that we needed. The device was revolutionary; it left its mark on humanity — it was a game-changer.

Now, in September 2020, QuantumScape claimed to have solved a 50-year-old conundrum: a ready-to-use solid-state lithium battery. The company also stated that the German car manufacturer Volkswagen would have cars on the street by 2025 using this technology. To top it all, the company also announced that they are going public.

Let’s take a step back and walk through this massive news one step at a time.

What is a solid-state lithium battery?

Since the 1970s, scientists have known that lithium would make a fantastic battery. Researchers worldwide joined a race to develop a lithium battery. However, more often than not, they failed and had to put down the fire caused by this alkali metal.

Lithium-ion batteries (LIB) are rechargeable batteries with small chunks of lithium. These batteries are powering iPhones, cameras, Tesla vehicles, and Macbooks around the globe. Lithium-ion batteries can overheat very fast and cause irreparable damage — Remember Boeing 787 and Samsung Note 7 incidents in 2017.

Li-ion batteries were invented in 1980, and Sony was the first to use them commercially a decade later. The technology was based on allowing small bits of lithium to shuttle between two electrodes. The quantity of lithium used in these batteries is relatively safe.

Solid-state lithium batteries stayed out of reach because no one had figured out a way to keep the battery safe from catching fire or even exploding. Alkali metals are combustible, and their reaction with water is rapid and highly exothermic. Therefore, the challenge to develop a commercially used solid-state lithium battery continued:

Metallic lithium could explode if it came in contact with a liquid.

Metallic lithium forms prickly needles inside the battery, which damages the plastic separator between the electrodes, thus causing an electrical short.

Since Sony commercialized the Li-ion batteries, they became cheaper and easier to manufacture. Li-ion batteries contributed to our current technological advances in portable electrical devices and vehicles. Researchers, however, never stopped striving for a pure metallic lithium battery. Labs around the world wished for a breakthrough; the breakthrough was achieved now by QuantumScape.

Volkswagen, the German car manufacture, verified the breakthrough. Now, QuantumScape needs to scale up its lab cell into a commercially sized battery. The consequences of this attempt, if successful, will immediately station VW and QuantumScape at the lead of the battery and electric vehicle competition. Solid-state lithium batteries charge faster and store more energy, which will allow for more distance per charge in electric vehicles.

With an enhanced battery and VW’s manufacturing capabilities the duo will take over the electrical vehicle market.

Pure metallic lithium batteries are also supposedly better at thermal management, which reduces the reliance on cooling systems found in today’s eclectic vehicles.

QuantumScape is going public in Q4 2020

QuantumScape agreed to merge with a special purpose acquisition company (SPAC) Kensington Capital Acquisition Corp. to raise the capital it needs to commercialize the pure metallic lithium batteries. This merge evaluates QuantumScape at $3.3 billion.

QuamtunScape joins an impressive number of companies that opted to go public via SPAC. Other EV companies such as Nikola Corp., Lordstown Motors, Canoo, and Fisker Inc. went public or announced their plans to go public this spring and summer, making 2020 the year of EV.

What is SPAC?

According to Investopedia, a SPAC is:

a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies.”

This route of going public has gained distinguished popularity recently, with more than 50 SPACs formed this year, raising more than $21.5 billion as of early August 2020.

A SPAC is generally formed by investors and sponsors with knowledge in a particular industry or business sector. The focus of the SPAC is to strike deals within its sector. When the founders create a SPAC, they usually have at least one particular acquisition target in mind. However, they do not identify their target to avoid detailed disclosures during the IPO process — This is where the name blank-check company comes from.

Volkswagen’s role

Photo by Cesar Salazar on Unsplash

VW invested so far $300 million in QuantumScape, $200 million this year alone. At the heart of the corporation is a joint venture between both companies, which was announced back in 2018. The joint venture aims to accelerate the development of pure metallic lithium batteries and to manufacture them on a commercial scale. In June, Volkswagen said that their plans for a pilot factory would be confirmed sometime this year.

Even though VW is a main backer of QuantumScape, the CEO of QuantumScape confirmed that his company is not only bound to VW.