Why QuantumScape Is Rallying

Shares of QuantumScape Corporation QS, which is developing next-gen, solid-state lithium-metal batteries, are advancing strongly Thursday.

What Happened: QuantumScape said it has met the technical milestone that was a prerequisite for German auto giant Volkswagen AG VWAGY infusing an additional $100 million.

The technical milestone related to Volkswagen successfully testing the latest generation of QuantumScape's solid-state lithium-metal cells in the former's lab in Germany.

Both companies executed a stock purchase agreement on May 14, 2020, that provided for the automaker to invest a total of $200 million in QuantumScape.

"We are delighted to have met this technical milestone with Volkswagen, and we look forward to working jointly to bring solid-state lithium-metal battery technology into industrialized mass-production," said Jagdeep Singh, co-founder and CEO of QuantumScape.

Related Link: Why Morgan Stanley Is Bullish on QuantumScape, Fisker, Bearish On Lordstown, Romeo Power

Why It's Important: Batteries are the key component of EVs, which are poised to snare a significant share of the market from ICE vehicles.

QuantumScape announced in mid-February it has successfully made multiplayer cells, which is seen as a major step in achieving a breakthrough in EV battery technology in a solid-state form.

The product had to be successfully tested ahead of scaling it from lab to mass production. The successful testing at Volkswagen's lab, therefore, bodes well for QuantumScape, keeping it on track for mass production by the 2023-2024 timeframe.

"QS is a solid state battery play which could be viewed as an alternative to lithium-ion and could significantly lower the cost of electric vehicles down the road and change the economics behind an EV vehicle," Wedbush analyst Daniel Ives said in a recent note.

QuantumScape shares were rallying 16.09% to $51.95.