This is still a market that rewards expensive moonshots over incremental technology improvements.
The latest electric-vehicle business to announce plans to go public via a special-purpose acquisition company is Solid Power, a Colorado-based developer of next-generation “solid-state” battery technology. On Tuesday,
Decarbonization Plus Acquisition Corporation III
DCRC 1.69%
said it would buy Solid Power for $1.2 billion. Including cash from the SPAC and the fundraising held alongside the deal, the combined companies would have a market value of roughly $1.9 billion at the current share price.
That is a lot less than the $12.8 billion market value of the other U.S.-listed solid-state battery company. California-based
QuantumScape,
QS 0.66%
which merged with a SPAC last year, became an investor darling after reporting some promising test results in December. Around Christmas, its market capitalization exceeded that of
Ford Motor.
The stock has since plummeted as investors have cooled on EV-related startups more generally, but the company is still more highly valued than most pre-revenue peers in the sector.
The lithium-ion batteries in today’s smartphones and Teslas contain a potentially flammable liquid electrolyte to ferry lithium ions between the cathode and anode in the charging and discharging process. Solid-state batteries promise to replace the liquid with a solid. While that solves some problems, the industry is particularly excited about the “lithium-metal” anodes that solid electrolytes might enable. These could bring massive theoretical cost savings and make long-range EVs much cheaper than traditional cars.
Coming up with a viable material for the solid electrolyte has proved an enormous challenge, though. QuantumScape thinks it has hit on a ceramic that works with a lithium-metal anode, and the test results that it has released are promising, albeit limited. Solid Power is pursuing another electrolyte material called a sulfide, and may be further down the testing route than QuantumScape. But the results it published with lithium-metal anodes were disappointing, so it is working with a more conventional silicon anode as a first step.
Essentially, QuantumScape is focusing on a harder-to-solve problem than Solid Power, with the potential for a more revolutionary solution. If the Californian company really has found a wonder material that enables lithium-metal batteries, it could become one of the next giants in an industry set to inherit the mantle of oil and gas.
That is also because QuantumScape has positioned its business model to capture more of the gains of any breakthrough, at greater capital cost. It plans to manufacture cells itself, whereas Solid Power’s approach is “asset light”: It will license cell designs to others and only make the electrolyte itself. Solid Power has taken care to ensure its technology is compatible with existing lithium-ion cell manufacturing so that existing battery suppliers could easily adopt it.
While there are real differences between the companies, it is still hard to rationalize such a big valuation gap. Both have credible partners in the automotive industry: QuantumScape is backed by
Volkswagen,
Solid Power by Ford and
BMW.
Neither expects to make meaningful revenue until the second half of the decade.
“Lithium-metal anodes are the endgame in battery technology, but both companies have significant challenges ahead and are years away from mass production,” says Mark Newman, a battery investor and former Bernstein analyst.
Ultimately, today’s valuations may not reflect the subtleties of battery technology so much as investors’ taste for big-picture disruption stories, whatever their chances of success.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
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