An Ultra-Secret Battery Startup Hints That It’s Blown Past Tesla — But Won’t Show the Goods
Experts question the claim by QuantumScape, backed by $500 million from Bill Gates, Silicon Valley venture capitalists, and VW
09/21/2020 By Steve LeVine Marker Medium
Early this month, QuantumScape, an ultra-secretive, $4.3 billion battery startup, startled the battery and electric vehicle communities with an announcement: In the fourth quarter, it would go public on the New York Stock Exchange. If everything went right, there would be the prospect of substantial profit for investors including VW and Bill Gates on some $500 million in bets on the company. That was on top of the transformation that the IPO would help bring about in the mass commercialization of EVs.
The surprising thing was that the whole thing rested on a still-uncertain matter: A blockbuster assertion by QuantumScape, not verified by outside scientists, that it was on a short path to a solid state EV battery using pure metallic lithium, a prized material that has been the subject of a decades-long global technology race.
Now, QuantumScape was out with a slide deck that said its battery would propel a mass-market EV about 90% further than conventional lithium ion, charge up in a lightning fast 15 minutes, and cost less than vehicles with current batteries.
To carry out the IPO, QuantumScape said it would use an increasingly fashionable financial arrangement called a SPAC, a fast-lane strategy that speeds a listing while avoiding the usual disclosure requirements. The data-skinny approach was fully in keeping with QuantumScape’s long reputation for obsessive stealthiness, and did not necessarily imply anything sketchy. But it did force experts, not to mention outside investors and everyone else, to more or less simply trust QuantumScape and its new partner, an already-listed shell company called Kensington Capital Partners, with which, in line with the rules of SPACs, it would merge. Wall Street, accustomed to the IPOs of no-revenue startups, seemed unfazed to encounter a company with no evidence of revenue or a product, and doubled Kensington’s share price September 3, the day of the announcement.
VW One-Ups Tesla With a Revolutionary Battery Breakthrough After 10 years in stealth mode, QuantumScape announces a $4 billion IPO, the first U.S. battery company to go public in… marker.medium.com
But blind trust is a considerable ask of EV and battery companies. In 1883, Thomas Edison famously called the battery business a preserve of “stock swindlers,” and the last decade had been a time of typically tall claims and outright fraud by purveyors of sleek EV concept cars and purportedly groundbreaking batteries to power them. Now, QuantumScape was out with a slide deck that said its battery would propel a mass-market EV about 90% further than conventional lithium ion, charge up in a lightning-fast 15 minutes, and cost less than vehicles with current batteries. VW, QuantumScape said, planned to equip some of its vehicles with the battery by 2025.
These were descriptions of a revolutionary battery with an unusually fast deployment. Could QuantumScape and VW genuinely pull this off? In the subsequent weeks, the battery and EV communities have expressed their doubts. Against an extremely short timeline, profound challenges appeared to remain in the non-trivial transformation of an early-stage, wholly experimental battery system into a commercial-scale factory. Neither in a hurricane of online chatter nor in my own conversations with academic, industry, and consulting experts did anyone express suspicion that QuantumScape fell into the camp that Edison assailed — companies that were merely “a mechanism for swindling the public.” Still, none believed the company could meet its stated deadline of getting into VW’s 2025 EVs. There was particular unease that QuantumScape had disclosed no data that would allow anyone to assess its claims, especially since such secrecy had been a hallmark of the last decade’s most notorious battery fabulists.
In a chase to carve out a dominant position as combustion gradually becomes a relic of the 20th and early 21st centuries, the giant automakers have announced plans to field scores of EVs over the next five years.
Doug Campbell, CEO of Solid Power, a leading QuantumScape competitor backed by BMW, Ford and Hyundai, suggested in defense of his own startup that the jury was still out as to who would ultimately put the first metallic lithium-powered EVs on the road — QuantumScape, his own company, or someone else. Consider Toyota, which, too, has said it expects to deploy a metallic lithium battery-powered car by 2025, though it still needs to bring down the cost. “How did they beat us to the punch?” Campbell responded when I asked him whether he had been outdone by QuantumScape. “Did they beat us to the punch on a creative financing scheme? [But that’s] a race we didn’t even enter.”
Atonce, EVs and futuristic batteries are all the rage. Since 2008, Elon Musk and his EV company, Tesla, have had the field largely to themselves. And with his webcast “Battery Day” tomorrow in Fremont, California, Musk intends to demonstrate he is still the biggest game in town.
But, pushed out of their lethargy by Tesla’s phenomenal success, a slew of rivals are breathing down Musk’s neck. In a chase to carve out a dominant position as combustion gradually becomes a relic of the 20th and early 21st centuries, the giant automakers have announced plans to field scores of EVs over the next five years. Small EV and battery startups have announced similar plans, and are the object not of one SPAC, but at least 10, all but one of which have almost no revenue, yet combined, boast an average valuation of $1.8 billion, well into unicorn stature. It’s impossible to know who will win or even survive the EV race, but a sign of discomfort among the leading U.S. automakers is their flight to safety in partnerships with some of the startups: VW and QuantumScape; Ford and Rivian, a luxury pickup truck maker; GM and Nikola, another truck company that just went public.
Why Tesla’s Battery Day Will Actually Live Up to the Hype Elon Musk will likely announce his EVs have finally become as cheap as conventional cars.
Yet it is the battery race that is perhaps the most consequential. The battery accounts for a third to half the cost of an EV, making continuous advances in energy density and cost crucial if your aim is to make the vehicles a mainstream product. Almost every EV on the planet is powered by workhorse lithium-ion batteries. Though they were discovered four decades ago at Oxford University, they are still the most advanced batteries in commercial use. In fact, lithium ion is on the cusp of a pivotal breakthrough: taking EVs across a crucial consumer barrier by giving them cost parity with conventional gasoline-propelled vehicles. If their price is the same as combustion, EV sales may surge in popular categories like crossover SUVs and pickups.
But doubt remains as to how big EVs will truly become in a global industry that sold 90 million new vehicles in 2019. By comparison, about 2.1 million electric cars were sold around the world last year, just 2.3% of the total. To rack up larger numbers, automakers need to crack the mid-priced market, in which vehicle prices are below $30,000. Which explains the frenzy to identify and find the next battery after lithium-ion, something that can make EVs much, much cheaper: a metallic lithium-based battery.
The quest to build an EV battery around pure lithium metal goes back to its elemental nature: It is the lightest metal on the periodic table, and thus can be stuffed in large amounts into a small and mobile battery, storing much energy while not weighing down the product it is powering. But it has been a dangerous pursuit because lithium metal is highly reactive with moisture, making it explosive. Over the last decade, lithium-ion batteries have caught fire aboard Boeings, in Samsung smartphones, and in Tesla S’s. They have also fatally short-circuited when growths called dendrites allowed their positive and negative electrodes to come into contact with one another. For three decades, the U.S. Energy Department has spent tens of millions of dollars in grants in an attempt to resolve these flaws and allow for the creation of a commercial metallic lithium battery that would open up the American EV mass market.
The battery accounts for a third to half the cost of an EV, making continuous advances in energy density and cost crucial if your aim is to make the vehicles a mainstream product. The leading solution researchers have been attempting is a “solid state” battery. The idea has been to do away with liquid electrolyte, the mediation layer of the battery that lies between the two electrodes, and replace it with a non-flammable solid. That would get rid of the flammability problem. But solid electrolyte has its own technical issues, in particular its susceptibility to dendrites, the spiky growths that short-circuit batteries.
In 2010, Jack Vaughey, a chemist at Argonne National Laboratory, outside Chicago, won a three-year Energy Department grant to take on the lithium metal conundrum. The key to making lithium metal work, Vaughey knew, was depositing it with glassy smoothness on the surface of the copper current collector, with no bumps, undulations, or defects of any sort. If there were any such imperfections, they were bound to grow into fatal dendrites. Not just that, but the lithium had to be able to shuttle back and forth during the battery’s charge and discharge cycle, and each time, again and again, deposit flat on the current collector. It could leave no crinkles, wrinkles, lines, or puckers. But that’s what happened anyway, said David Schroeder, chief technology officer at Volta Energy Technologies, a battery investment firm outside of Chicago, who worked with Vaughey on the project: “It was not smooth, but a mess,” Schroeder said. In 2013, the project ended in failure.
About that time, QuantumScape was beginning its own stab at the metallic lithium challenge. The company had been formed three years earlier by a Stanford professor named Fritz Prinz, one of his doctoral students, Tim Holme, and Jagdeep Singh, a well-known Silicon Valley entrepreneur, who would be CEO. Singh was preternaturally skilled at fund-raising, and rapidly attracted an initial $23 million in investment from Kleiner’s John Doerr and Vinod Khosla, two of Silicon Valley’s most prominent venture capitalists. More rounds followed until the company had amassed a war chest of $200 million in VC funding and another $300 million from VW. QuantumScape had become probably the richest battery startup in the country, a Goliath that hired what some called the greatest concentration of top battery talent in any one place anywhere.
But by this summer, when SPAC mania had fully struck the U.S. EV and battery space, QuantumScape had amassed at least 18 patents for LLZO. In 2014, QuantumScape filed the first of a long series of patents on a new material that promised to finally resolve many of the obstacles to a working metallic lithium-based battery. Invented around 2007 by a German chemist named Werner Weppner, a professor at Christian-Albrechts University, the material was known by its chemical acronym, LLZO. Argonne’s Vaughey had himself worked with Weppner’s invention as part of his own project. LLZO was attracting a slew of interest, in part because, unlike most solid state electrolytes, it did not disintegrate when it came into contact with metallic lithium. Yet Vaughey and Schroeder found another annoying problem with it: When the battery began to cycle, the metallic lithium burrowed, atom by atom, underneath and between the mass of tiny grains that made up the LLZO. And once wedged in there, the atoms eventually broke through the material and shorted the battery.
Given QuantumScape’s predilection for secrecy, it’s not known how it went about tackling the show-stopping problems of maintaining an ultra-smooth lithium metal surface cycle after cycle, and preventing the lithium from burrowing and slicing through the LLZO. (In fact, we don’t know for a fact that LLZO is QuantumScape’s solution, only that that’s the consensus of the battery community, derived from studying the company’s patent portfolio.) But by this summer, when SPAC mania had fully struck the U.S. EV and battery space, QuantumScape had amassed at least 18 patents for LLZO. And, while leaving out the details, Jagdeep Singh, the QuantumScape CEO, told me that his team had worked out “hundreds” of bugs, and finally emerged with a working metallic lithium battery — at least at small scale.
The last decade has been both triumphant and harsh on batteries. The 2011 Nissan Leaf went 73 miles on a single charge; today’s altogether affordable Chevy Bolt goes 259, and the standard is quickly growing to a previously unthinkable 300 miles and more. The under-appreciated batteries in these cars meet other daunting metrics, such as allowing the vehicles to accelerate quickly — to tap and use a lot of the stored energy instantly — and to do so safely, avoiding fires or explosions. In addition, the cost of newer batteries has plunged, allowing for cheaper and cheaper EVs.
When members of the battery community express frustration over the lack of any data from QuantumScape corroborating its claims, it is the experience of Envia and Sakti3 that is often on their minds. Along the way, there have also been black eyes. In 2012, Envia, a small Silicon Valley startup, had accomplished an extraordinary feat by beating out established companies for a four-year contract to produce the 200-mile battery for GM’s coming flagship electric Bolt. Just months later, though, the deal fell apart when it turned out that Envia had been exaggerating about its battery’s performance and even its role in producing it.
LG, the South Korean giant, ended up providing the battery for GM, and the name Envia became emblematic for the field’s chicanery. In 2015, Michigan-based Sakti3, one of the most secretive battery startups of its age, sold itself to Dyson, the vacuum cleaner company, for $90 million amid reports that it had been materially inflating its achievements. Over the next four years, Dyson relinquished Sakt3’s core patents, let Sakt3 CEO Ann Marie Sastry leave the company, canceled its battery program that had been based around the acquisition, and finally, after $600 million in spending, cut the EV program entirely. In an announcement last evening, the founder of Nikola, GM’s electric truck partner, resigned amid reports that the Securities and Exchange Commission and the Justice Department are probing allegations that it misled investors by exaggerating its technology claims.
When members of the battery community express frustration over the lack of any data from QuantumScape corroborating its claims, it is the experience of Envia and Sakti3 that is often on their minds. Before QuantumScape’s IPO, remarks in the battery community about its secrecy were more of the cultural variety — a description of its propensities. Now, though, the issue is a hard-and-fast complaint — QuantumScape is selling shares to the public; it needs to come clean.
I raised the subject of disclosure multiple times with Singh. A computer scientist by training, Singh is low-key and calm, with an easy smile and a reputation in Silicon Valley as a tough, single-minded entrepreneur. He pointed me to QuantumScape’s history. Disclosure, he suggested, reflects weakness — when you are short of cash, you are forced to go out and raise it by talking about yourself. Since QuantumScape has been cash rich, it has had the luxury of silence. But that’s not all, he said. Talk was cheap — other battery companies told tall tales before they actually had a strong product. This was why, he said, even as the company had figured out metallic lithium, it had relied on VW — its customer — to issue a validating statement, and still said nothing itself.
Only, it wasn’t clear that VW had validated QuantumScape’s cells. In June 2018, VW announced that it was investing $100 million in QuantumScape. As part of the transaction, the automaker released a statement that was pure confidence in the startup: “Volkswagen successfully tested QuantumScape early-stage solid-state battery sample cells in Germany running at automotive rates of power — an industry first,” it said.
This version omits the words “successfully” and “an industry first,” and merely notes that the cells had been tested, a non-committal and thus meaningless bit of wording.
But three months later, in September 2018, when the investment was closed, VW’s effusive language subtly changed. In the new press release, VW said, “Volkswagen has already tested QuantumScape early-stage solid-state battery sample cells in Germany running at automotive rates of power.” This version omitted the words “successfully” and “an industry first,” and merely noted that the cells had been tested, a non-committal and thus meaningless bit of verbiage.
The even stranger thing was that during the promotion around the SPAC — QuantumScape’s coming out party, the first time it had ever uttered a public word about its product — its slide deck quoted the second VW statement, not the first. I couldn’t figure it out. It didn’t seem possible that a company as meticulous and painstaking as QuantumScape somehow missed that its single supposed validation was missing the key descriptors. But that’s what both Singh and Enrico Beltz, head of VW’s media relations, suggested.
They separately said the omissions in the second statement were inadvertent and did not indicate any change in VW’s attitude about the startup’s battery. In terms of the slide deck when the IPO was announced, Singh said no one had noticed the wording.
So I asked Beltz directly whether VW had validated QuantumScape’s work. He responded by email, “QuantumScape is on a good way to develop this very promising technology and all tests show good progress. For detailed information please contact QuantumScape directly.” What tests was he referring to? What is the definition of “good progress”? Why didn’t he just respond unambiguously and say that, “Indeed, we have validated them.”
I also asked Beltz whether VW was on track to deploy QuantumScape’s battery in the cars it sells commercially in 2025, as Singh claimed. He responded, “We are working on a timeline together with QuantumScape and the next steps in the research activities of this technology will be essential to finalize further decisions.” Again, VW seemed to be backing away from any concrete assurances about when or if QuantumScape’s material will find itself into a VW Group vehicle.
My sense was that QuantumScape was stuck in a loop, cloistered for so long that secrecy was now muscle memory and personal attitude. There appeared to be mild commercial exaggeration in Singh’s schtick of the sort that salesmen in any field do. For instance, he told me that QuantumScape was the only metallic lithium battery company to get its cells validated by a major automaker at the industry’s demanding charge-discharge rates. But Doug Campbell of Solid Power asserts that his company, too, has done so, though he would not say by which automaker — Hyundai, BMW, Ford or Nissan, the carmakers invested in his company. Yet Singh was mainly straightforward. He said he wasn’t prepared to provide corroborating data for this story, but that he did intend to release some in the fourth quarter as part of an event for stock analysts.
He was non-committal about the timing — when the stock ticker changes to QS, and QuantumScape is officially listed, it is possible that investors will still be buying and selling the stock absent evidence of the company’s claims. But at least there will be data.
QuantumScape has a ways to go before reaching commercial production. Until now, the hardest thing had been mastering the LLZO, which required so many tweaks that, in effect, Singh’s team had “invented a whole new material,” he said. Rivals could try to catch up, but Singh said that would be hard. With a billion dollars in cash in hand, QuantumScape had enough to take the next big step — scaling up, especially getting the tricky LLZO to work in square meter-size sheets. “What is left is execution risk,” Singh said, meaning producing the product at a commercial scale. “Can this team do the blocking and tackling that’s required to make this happen? … We’ve got a real shot at bringing this to market.”
Again, some battery experts have their doubts. Ordinarily, battery-makers try to do all their work at room temperature, for reasons of ease and cost. But the LLZO powder must be heated to 1,300 degrees centigrade in order to create a dense sheet, and it must be laid down thin — just 20 microns, less than half the thickness of a human hair. QuantumScape’s battery cells must be scaled up from a single layer to a stack, to be inserted into a prismatic pack. And there is the usual problem of laying down the metallic lithium uniformly.
Even if all of this goes according to plan, including rigorous testing along the way, the process would take a lot of time, some experts argue. QuantumScape might only be ready for a commercial vehicle in 2027 or so — two years later than planned — estimated James Frith, head of energy storage at Bloomberg NEF, a renewable energy consultancy. Jordi Sastre Pellicer, a PhD student researching a dissertation on LLZO at the Swiss Federal Laboratories for Materials Science and Technology, wrote a long, much-read Twitter thread casting doubt on the practicality of the material. “I have to say I remain quite skeptical until I see some actual data of a battery with the performances they claim,” Pellicer told me.
All is not dark. One of the main worries has been that the LLZO will be too brittle and could shatter during the manufacturing process. But Jeff Sakamoto, a professor at the University of Michigan who has long worked with LLZO, said that’s unfounded. Under 100 microns in thickness, he said, LLZO becomes flexible and bendable, and can be easily integrated into current lithium-ion rolling machines. “Mother Nature cut us a break,” he said. A big upside, he said, is that “at the moment, we don’t have to violate physics to make this work.”
As long as the QuantumScape story ends with validation of metallic lithium and a solid state battery installed in a VW vehicle, the current frustration around its opacity will be forgotten. The company will probably become a new model for how to do big battery science: throw a ton of money at a top-notch team, lock them into a room, and give them a decade to produce something.
Given the stakes of getting batteries right — cutting the use of fossil fuels, creating new jobs in struggling rust belts, and more — that will be an enormous win. The problem will be if, after all this, QuantumScape comes up short. But if so, that will apropos for batteries. “Battery companies make bold claims all the time,” said Dan Steingart, a professor at Columbia. “The anti-bodies in the community are pretty strong. I’m in a trust but verify mode. But if it works, it would be a new chapter in batteries.”
