Solid Power vs. QuantumScape: What Is the Best Solid-State Battery Bet?
The solid-state battery market is expected to grow at a rate of 58% per year to hit almost $4 billion by the end of the decade. Solid Power (SLDP) and QuantumScape (QS) are two startups designing solid-state batteries for electric vehicles (EVs). Which one will capture a bigger slice of the market?
Matt Johnston Updated April 17th, 2022
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Why invest in solid-state batteries?
Electric car sales are growing. About 6.6 million EVs were sold globally in 2021. That’s more than double the number sold in 2020. But at less than 10% of the global car market, electric cars still make up just a small share of total global car sales.
Consumers remain hesitant about buying EVs partly due to how long it takes to charge them compared to the amount of time it takes to fuel a conventional internal combustion engine (ICE) vehicle. EVs also don’t have the typical range of an ICE vehicle.
Recent advances in battery technology could change that. Although they are not yet commercially available, solid-state batteries for EVs and energy storage have many potential advantages over conventional lithium-ion batteries.
Solid-state batteries contain a solid electrolyte; hence, the name “solid-state.” In contrast, lithium-ion batteries employ a liquid electrolyte to transport ions between the cathode (positive electrode) and anode (negative electrode).
That liquid is flammable, which means the solid-state battery is safer. But that’s just one advantage. Solid-state batteries also promise more range, faster charging, and longer battery life. They could also eventually be cheaper than lithium-ion batteries.
Some electric and traditional automakers already plan to use solid-state batteries. Chinese EV-maker NIO said it would deliver its ET7 sedan featuring solid-state cells as soon as the fourth quarter of 2022. Toyota plans to start manufacturing solid-state batteries in the mid-2020s.
The two publicly traded startups focused on solid-state batteries over the next several years are Solid Power, founded in 2011, and QuantumScape, founded in 2010. Both companies have partnered with some big names in the automotive industry to develop solid-state battery technology.
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Solid Power vs. QuantumScape: What are the pros and cons?
Solid Power is working on three different solid-state battery designs: Silicon EV Cell, Lithium Metal, and Conversion Reaction Cell. All three designs use the company’s proprietary sulfide-based solid electrolytes, unlike the liquid- or gel-based lithium-ion batteries.
Its Silicon EV Cell design is expected to provide a charge in under 15 minutes. The company says its design will also offer a 15-35% cost advantage over lithium-ion battery packs. Solid Power also expects its batteries to be safer and have a longer lifespan.
QuantumScape’s lithium-metal solid-state battery design uses a solid ceramic electrolyte. The design eliminates the need to manufacture an anode, which later forms on the first charge. Such a design provides greater energy density than conventional battery technology, allowing for more energy to be stored.
QuantumScape’s design promises to increase the range of a mass-market sedan from about 123 miles to 233 miles without increasing the size and weight of the battery pack. The design should also deliver a charge from 10% capacity to 80% in less than 15 minutes. The company also says its batteries will be longer-lasting, safer, and more affordable.
Solid Power is taking an asset- or capital-light approach to its business model. The company is not going to manufacture batteries, eliminating the need for manufacturing facilities.
Instead, Solid Power will license its solid-state battery designs to its commercialization partners. Those partners will manufacture the actual batteries. Although the company plans to make and sell its proprietary sulfide-based solid electrolyte material, not needing production facilities for the batteries will keep costs down.
QuantumScape, on the other hand, will take charge of battery production. The company is in the process of building two manufacturing facilities. The manufacturing process will be very similar to that used in the production of conventional lithium-ion batteries.
QuantumScape plans to get its input materials from leading suppliers within the lithium-ion battery industry. For example, its ceramic-based separator is made from materials that are widely available and produced in various locales around the world.
Partners and backers
Both Companies have significant backers and partners in the automotive industry.
Solid Power is backed by Ford, BMW, and South Korea-based SK Innovation. The company also has joint development agreements with BMW and Ford to develop its battery cells for future EVs.
QuantumScape is backed by and has a 50-50 joint venture (JV) with Volkswagen that will enable industrial-scale production of its batteries. As part of the agreement, the two companies will equally share the revenue and profits generated by the JV.
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Solid Power vs. QuantumScape: Recent performance
Like other highly valued companies with no revenue to speak of (yet), SLDP and QS stocks have slumped recently. Solid Power went public in December 2021 via a SPAC merger, so only its year-to-date performance is included in the table below.
|Solid Power (SLDP)||NA||-1%|
Data as of 4/15/2022
Solid Power has yet to generate meaningful revenue from its principal business activities. The bit of revenue it has earned, around $3 million in 2021, has come primarily from research and development related to government contracts and grants. A small share has also come from selling its battery cells and materials in non-commercial markets. Solid Power’s operating loss widened to $26.5 million in 2021 from $11.6 million in 2020.
QuantumScape, on the other hand, has not generated any revenue as of December 31, 2021. It recorded a loss from operations of $215 million in 2021, up from the operating loss of $81 million in the previous year. The company said that it expects to incur significant expenses and continue making losses for the foreseeable future.
Solid Power vs. QuantumScape: Valuation
|Company||Market Capitalization||Enterprise Value / FY24 Revenue|
|Solid Power (SLDP)||$1.5 billion||123x|
|QuantumScape (QS)||$7.8 billion||545x|
Data as of 4/15/2022
Solid-state batteries are still in development, and neither company generates much revenue. So analysts are valuing these companies based on future sales. The EV/revenue ratio gives you an idea of how much you’re paying for a company per dollar of sales or revenue it is expected to generate.
Unfortunately, the numbers are not very meaningful given that material sales are not expected until the second half of this decade. Solid Power looks cheaper because its products are expected in the market sooner, even though it has less market cap.
💰 Solid Power vs. QuantumScape takeaway
- Both SLDP and QS are very risky stocks. Neither company generates much revenue today, and won’t until 2025+. So you are really betting on the state of the technology, which is hard to judge from the outside. However, QS is the larger company with possibly more upside because it will also control its manufacturing. The company is also trying to solve a harder design problem than Solid Power, with the potential for a much more revolutionary solution.
- Of course, you can avoid the risk associated with these pure-play companies and instead get some exposure to solid-state batteries by investing in the automakers that are partnering with them. Volkswagen, BMW, and Ford are three options.
🔔 Learn more about investing in solid-state battery stocks.
NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.
Author: Matt Johnston
Matt is a finance and economics writer with seven years of professional writing experience, including over five years at Investopedia. He also sometimes teaches macroeconomics at St. Stephen’s University. But his intellectual interests are not limited to the world of finance and economics—he also enjoys reading history and philosophy as well as learning new languages, both natural and programming. Matt currently lives in Montreal, Quebec.