What’s The Deal With Solid Power?
Solid Power action, stock market reaction … the weak are ripped and torn away.
Electric vehicle (EV) power, crushing all that cower … battery is here to stay!
Mr. Great Stuff’s talking about batteries? Are you OK? Has lunacy found you?
It’s true, Great Ones. I’m not the biggest fan of battery-powered EVs. I’m more of a hydrogen fan, personally. But y’all know that already…
It’s not that I hate battery technology. It certainly has its place in numerous applications, especially in at-home and onsite solar power generation. But in EVs? I feel there are much better and more convenient sources of power — i.e., hydrogen fuel cells.
But I digress…
The thing is, I know that many of you Great Ones out there are EV battery fans. And for you, I have quite the interesting investment opportunity today.
As you’ve probably guessed, Solid Power is a battery developer. What’s more, the company is designing and producing a new, cutting-edge solid-state lithium battery.
If you follow the EV investing world, you’re probably already familiar with solid-state batteries. But, for those EV battery noobs out there, 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’re much less likely to explode than the current lithium-ion batteries on the road.
That last part has become particularly important to investors this year given the rash of Tesla, General Motors and Hyundai EV batteries going nuclear. After all, if I wanted an in-car barbeque, I’d ask for an in-car barbeque.
According to Solid Power CEO Doug Campbell, the reason all current-generation EVs are prone to increased fire risk is that EV batteries use a liquid electrolyte that acts as “the spark that leads to thermal runaway.”
I have to admit that “thermal runaway” is the most corporate BS way of saying “burst into flames” I’ve heard in some time. But Campbell is right. The liquids used in conventional EV batteries are prone to overheating. But the real kicker is that these liquids are also flammable.
That’s some bad juju right there.
To solve this overheating problem, Solid Power has developed a sulfide-based solid electrolyte material.
Because the electrolyte used in Solid Power’s batteries is, well … solid, it is considerably less prone to overheating. Furthermore, the sulfide-based electrolyte is also nonflammable, which is a huge plus.
Solid Power Versus QuantumScape
Some of you probably have déjà vu right about now, and rightly so. There’s already a solid-state EV battery maker trading on Wall Street called QuantumScape (NYSE: QS).
QuantumScape was among last year’s hottest IPOs, quickly rocketing from a post-September IPO price of about $17 to more than $100 by December.
But, since QuantumScape doesn’t have any actual products yet — those are still a few years down the road — the hype quickly died down, and QS now trades for about a quarter of its all-time high.
Yes, QuantumScape and Solid Power have their similarities. Both are developing solid-state lithium batteries for the EV and mobility markets. Both have big-time backers in the automotive industry — Volkswagen for QuantumScape; Ford and BMW for Solid Power.
But that’s about where the similarities end. You see, Solid Power doesn’t want to make batteries. “Long term, we’re 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 actually make the batteries it’s designing. Solid Power wants to license those designs to automakers and let them shoulder the cost of battery manufacturing.
It’s a brilliant move, if you ask me. By shifting the cost of battery manufacturing to automakers and their supply chains, Solid Power doesn’t need to build costly battery factories like QuantumScape does.
Keeping It “Capital Light”
Let’s hear from Campbell again: “Let’s face it, what’s the probability that little Solid Power is going to grow up and displace the likes of Panasonic, LG, CATL? … It’s capital-light, but it’s also realistic.”
Not gonna displace Panasonic? Not with that attitude you’re not.
“Capital-light” has a very nice sound to it — especially with today’s weird debt and interest rate issues. What’s more, there’s a lot less direct competition in the EV and battery materials market.
What this means is that Solid Power has much lower overhead costs than QuantumScape. As such, it has lower capital requirements in order to expand operations.
For example, Solid Power’s pending $1.2 billion SPAC merger with Decarbonization Plus Acquisition III is expected to generate about $600 million for the company. According to CEO Campbell, this is enough to fund Solid Power through 2026 or 2027.
In the meantime, the company is already churning out its sulfide-based electrolyte in two expansion factories. And it has Ford and BMW building EV test batteries using said sulfide electrolyte. If everything goes well with the Ford and BMW battery tests, Solid Power is ready to ramp up production next year to meet early demand.
On the other hand, QuantumScape has already had nine funding rounds and 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. (It’s still developing them, you see.)
In fact, QuantumScape doesn’t anticipate any notable battery sales until about 2025.
If everything goes right for Solid Power, the company could begin generating revenue as early as the second half of 2022.
But for everything to go right, the company needs Ford and BMW to not only produce solid-state EV batteries from Solid Power’s designs — it also needs those batteries to hold up during testing.
And then … it needs both companies to get fully on board with making their own batteries and buying solid-state sulfide electrolytes.
By comparison, QuantumScape just needs to perfect its battery design, and it’s off to the races with Volkswagen — the largest automaker in the world. That’s 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 EV battery investors will soon have two very interesting options:
- QuantumScape: A high-cost, long lead-time business model with direct internal quality controls.
- Solid Power: A low-cost, short lead-time business model with a licensing add-on but no direct quality control over the end product.
The latter is clearly the lower-cost model, but it relies heavily on customers to build their own batteries. This gets 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 these batteries are always “just a few years” away.
So … what if there was a third option?
There’s only one company in the entire Western Hemisphere that supplies this critical material on such a large scale. And as EVs take over roadways all across America … they will rely on this material for future success.
Picking up shares of this one company today could be the best investment decision you make in your entire life.
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Editor, Great Stuff
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