QuantumScape Defends Its Battery Breakthrough Against the Short Sellers
(Bloomberg) -- QuantumScape Corp. is the hottest battery-maker on the market, with recent valuations hovering between $13 billion and $20 billion. While the San Jose, California-based startup says its next-generation battery will increase the range of an electric car by as much as 50% and reduce the charging time to less than 15 minutes, it’s been tight-lipped about how.
The battery industry is highly secretive, and much of QuantumScape’s future success depends on its ability to protect its technology and retain top talent. With little standardization and no way to test claims, it’s hard for speculators in the space to judge the true risk of their investments. The combination of hype and mystery is always intoxicating for short sellers, and QuantumScape has proved no exception. Just shy of two weeks ago, activist firm Scorpion Capital issued a report calling the company a “scam.”
The 188-slide Scorpion report was based on anonymous sources and didn’t change the evaluations of independent battery experts. Many of the salient issues it raised—such as the difficulty of finding new industry-grade materials, showing test results from small batteries, or not subjecting the battery to independent evaluation—had been scrutinized in the past. If the company’s scientific breakthrough is real, it’s no trivial task moving a product from the lab to the factory floor. To do that, especially when progress is measured every quarter, is harder still. The stock price fell for a few sessions after the Scorpion report was published, but it has since recovered.
At the Bloomberg Green Summit, Akshat Rathi spoke with QuantumScape Chief Executive Officer Jagdeep Singh about the company’s 10-year journey, the difficulty of innovating in battery materials, and the challenge of dealing with a short-seller attack while maintaining investor trust.
Here are some of the highlights from the conversation:
Bloomberg Green: When did you start thinking about batteries?
Jagdeep Singh: I had just purchased a Tesla Roadster after it was introduced in 2008. You could argue that it was the future of cars: fast, fun, clean. But all its limitations stemmed from batteries. I got somewhat obsessed with trying to solve the problem. I became convinced that the battery problem may be the biggest unsolved problem in all of technology.
What would a better battery look like?
There were five key problems we wanted to solve. We wanted to double the energy density, so increase the range of a car on a single charge. Faster charging to be comparable to refilling a gasoline-powered car. Safer, longer life and ideally lower cost.
But your first approach ended up in failure, right?
Pivots are never painless. Fortunately the pivot was made within 12 months of launching the company, before we’d spent a lot of capital and gone too far down that path.
The secrecy in the industry opens up battery companies to short-seller attacks. What’s being done to address it?
The reason for secrecy is because it takes a lot of time and energy to work on these new materials. I don’t have a problem with secrecy. What I have a problem with is, if you’re going to be secret, then you shouldn’t make claims. If you’re going to make claims about your performance, you have to show the data that supports those claims.
You’ve shared some data, but it’s data from your labs. Will you subject your battery to publishing data with independent validation?
I’ve never understood why that’s considered more objective. It’s a paid lab that’s testing your cells. To me, a much higher level of validation comes from customers. The customer is paying you, which means they have a much higher bar to be accepted. But if getting a third-party lab to test our cells would get rid of these kinds of random attacks, it’d be something that we consider.
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