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QuantumScape
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== Challenges ahead == '''Manufacturability''' While the value solid-state batteries could provide to future mobility is potentially high, there are numerous uncertainties regarding QuantumScape’s ability to deliver on its plans, including challenges to ramp production and eventually reach profitability. First and foremost, the company is working to scale up production of a technology that has never been mass produced before. QuantumScape has begun testing and validation of some multi-layer cells with about 16 layers in total, but a production-ready cell would need to work with 100+ layers altogether. Indeed, the 16-layer development continues to make progress, but it appears that QS still has a long road ahead to ensure that the cells continue to deliver optimal performance once the company reaches its 100+ layering target. Once the tests on cells with 100+ layers is completed to satisfaction, QS will face the larger obstacle of ramping production toward its initial capacity of 21GWh. Getting initial volumes to operate on par with OEM standards is one thing, but being able to maintain the same level of quality on thousands of cells at a time in a brand new manufacturing process could prove to be a more difficult challenge. The solidstate batteries developed by the company share many of the same manufacturing processes as typical li-ion cells even without the need for normal anode production, but its unique separator and different assembly process could lead to unforeseen complications and expenses mounting ahead of commercial launch. At the same time, complications associated with scaling production on an industry-first product could very well force the company to push back its timeline to launch as well, delaying its path toward profitability. Investors will continue to monitor datapoints and development progress to better understand its ability to meet stated targets for launch. '''Capital needs''' In addition, QS will likely need to turn back to the capital markets in order to raise additional funding to expand its volumes beyond the initial QS-1 Expansion and QS-2 lines, even barring any delays in the ramping process. Management has stated that the company has enough capital with its partners to support its initial capacity build out, but as it looks to capture a meaningful share in the EV market over the course of the decade, it will need to significantly expand its output in outer years to support VW and other OEMs’ volume goals. Moreover, this all assumes that QS is able to ramp manufacturing on its batteries efficiently without any setbacks as discussed above. Should the company delay its timeline to launch, its near-term cash burn could force the company to look to raise additional capital simply to meet its initial targets and further pushing back its expansion opportunity and limiting its ability to capture meaningful share as competition races to catch up. '''Competition remains stark''' At the same time, QuantumScape will need to maintain its first-mover advantage in order to capture share in the future mobility market. Many traditional li-ion players are working on proprietary SS battery designs (including CATL and Samsung), which could come to market sooner than anticipated given the established manufacturing footprint and battery production expertise maintained by incumbents. Meanwhile, QS is also racing numerous new entrants similarly developing solid-state batteries from the ground up, including Solid Power and SES in particular. Indeed, these competitors are developing “solid-state” batteries much like QS, but with some unique differences that could simplify the road to mass production. Deutsche Bank highlights SES’ approach, which is a “hybrid” SS battery, allowing the company to rely more heavily on the traditional li-ion manufacturing process with little required retooling necessary to produce its proprietary systems. SES also remains in the early development stages, but its unique manufacturing process could prove to be a smoother road to mass volumes allowing it to reach the market sooner than QS despite the latter’s development lead to date. In this instance, QS could sacrifice considerable share in the EV pace in the short-term following launch. Nevertheless, QS will still maintain its all-important OEM partnerships which guarantee certain volumes and could allow the company to regain its footing in a more mature EV/SS market. Lastly, traditional li-ion batteries are not simply going to disappear with the introduction of next-generation battery technologies. The traditional incumbents continue to make incremental improvements on the li-ion design, driving gains in terms of energy density and cost in particular. These advancements could allow li-ion batteries to remain particularly competitive with initial SS cells in terms of performance in the first few years while offering better pricing, minimizing the disruption that SS batteries are expected to have on the market. In this case, QS and other SS battery makers could see a slower ramp on volumes in the first few years and further delay the timeline to reach true profitability.
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