What’s the deal with solid energy?
Solid energy action, stock market reaction … the weak are ripped apart and ripped off.
Electric vehicle (EV) power, squashing all that fear … the battery is here to stay!
Mister. Good thingare you talking about batteries? Are you okay? Has madness found you?
It’s true, Big. I’m not the biggest fan of battery electric vehicles. Personally, I’m more of a hydrogen fanatic. But you all already know …
Not that I hate battery technology. It certainly has its place in numerous applications, especially in home and on-site solar power generation. But in electric vehicles? I think there are much better and more convenient sources of energy, that is, hydrogen fuel cells.
But I digress …
The thing is that I know that many of you Big there are EV battery fans. And for you, today I have an interesting investment opportunity.
As you probably guessed, Solid Power is a battery developer. In addition, the company is designing and producing a new state-of-the-art solid-state lithium battery.
If you follow the world of EV investing, you are probably already familiar with solid state batteries. But, for those EV battery newbies, let’s break things down real quick.
Solid-state lithium batteries promise considerably faster charge times, longer battery life, higher energy density … oh, and they are far less likely to explode than current lithium-ion batteries on the road.
That last part has become particularly important to investors this year due to the eruption of Tesla, General Motors and Hyundai EV batteries going nuclear. After all, if you wanted a car barbecue, you would order a car barbecue.
According to Solid Power CEO Doug Campbell, the reason all current generation electric vehicles are prone to an increased risk of fire is that electric vehicle batteries use a liquid electrolyte that acts as “the spark that leads to thermal runaway.”
I have to admit that “thermal runaway” is the dumbest way of saying “burst into flames” that I have heard in some time. But Campbell is right. The fluids used in conventional electric vehicle batteries are prone to overheating. But the real catch is that these liquids are also flammable.
That’s bad juju right there.
To solve this problem of overheating, Solid Power has developed a solid electrolytic material based on sulfur.
Because the electrolyte used in Solid Power batteries is, well … solid, it’s considerably less prone to overheating. Also, the sulfur-based electrolyte is also not flammable, which is a great advantage.
Solid energy vs. QuantumScape
Some of you are probably having déjà vu right now, and for good reason. There is already a manufacturer of solid-state electric vehicle batteries listed on Wall Street called QuantumScape (NYSE: QS).
QuantumScape was among the most popular IPOs last year, and it skyrocketed quickly from a post-September IPO price of around $ 17 to more than $ 100 in December.
But, since QuantumScape doesn’t have any real products yet (there are still a few years down the road), the hype quickly died down and QS is now trading around a quarter of its all-time high.
Yes, QuantumScape and Solid Power have their similarities. Both are developing solid-state lithium batteries for the mobility and electric vehicle markets. Both have major sponsors in the automotive industry: Volkswagen for QuantumScape; Ford and BMW for Solid Power.
But that’s where the similarities end. You see, Solid Power doesn’t want to make batteries. “In the long run, we are a materials company,” says CEO Doug Campbell. “We want to be the industry leader in solid electrolyte materials.”
That’s right – unlike QuantumScape, Solid Power doesn’t want to build the batteries it is designing. Solid Power wants to license those designs to automakers and let them bear the cost of manufacturing the batteries.
It’s a brilliant move, if you ask me. By shifting the cost of battery manufacturing onto automakers and their supply chains, Solid Power doesn’t need to build expensive battery factories like QuantumScape does.
Keeping it “Capital Light”
Let’s hear again from Campbell: “Let’s face it, what is the probability that the little Solid Power will grow and displace companies like Panasonic, LG, CATL? … It’s light in capital letters, but it’s also realistic. “
Aren’t you going to displace Panasonic? Not with that attitude that you are not.
“Capital-light” has a very nice sound, especially with today’s weird debt and interest rate problems. In addition, there is much less direct competition in the market for materials for batteries and electric vehicles.
What this means is that Solid Power has much lower overhead costs than QuantumScape. As such, it has lower capital requirements to expand operations.
For example, Solid Power’s pending $ 1.2 billion SPAC merger with Decarbonization Plus Acquisition III is expected to generate around $ 600 million for the company. According to CEO Campbell, this is enough to fund Solid Power through 2026 or 2027.
Meanwhile, the company is already producing its sulfur-based electrolyte at two expansion factories. And it has test batteries for electric vehicles from Ford and BMW that use said sulfur electrolyte. If all goes well with the Ford and BMW battery tests, Solid Power is set to ramp up production next year to meet initial demand.
On the other hand, QuantumScape has already had nine rounds of funding and has raised $ 1.2 billion for operations, R&D and expansion. And the company will likely need more funding once its solid-state batteries are ready for prime time. (He’s still developing them, you see.)
In fact, QuantumScape doesn’t anticipate notable battery sales until about 2025.
If all goes well for Solid Power, the company could start generating revenue from the second half of 2022.
But for everything to go smoothly, the company needs Ford and BMW to not only produce solid-state electric vehicle batteries from Solid Power’s designs, they also need those batteries to be maintained during testing.
And then … you need both companies to fully join in manufacturing their own batteries. and buy solid state sulfide electrolytes.
By comparison, QuantumScape just needs to fine-tune its battery design and it’s race-ready with Volkswagen, the world’s largest automaker. It is quite an ace to have in your back pocket.
Now, I want to remind you that I have no horse in this EV battery race. But it seems to me that inverters in batteries for electric vehicles will soon have two very interesting options:
- QuantumScape – A long-term, high-cost business model with direct internal quality controls.
- Solid Power: a low-cost, short-term business model with a license add-on but no direct quality control on the final product.
The latter is clearly the lowest-cost model, but it relies heavily on customers building their own batteries. This brings Solid Power to market faster, but only if its biggest investors, Ford and BMW, are up to the task.
QuantumScape, by comparison, has more control over its end product … but the company seems content to say that these batteries are always “a few years” away.
So … what if there was a third option?
There is only one company in the entire Western Hemisphere that supplies this critical material on such a large scale. And as electric vehicles take over the roads across America … they will depend on this material for future success.
Buying shares in this company today could be the best investment decision you will ever make.
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Have a tremendous weekend break Big!
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Editor, Good thing