2024-07-15 02:02:00 ET
QuantumScape (NYSE: QS) stock price has gone parabolic, joining other companies in the electric vehicle (EV) industry like Tesla, Lucid, and Rivian.
The shares surged to $8.63 on Friday, its highest point since January 9th. They have jumped by over 76% from the lowest point this month.
QuantumScape has made progress
QuantumScape shares have done well in the past few days after the company announced commercialization plan. In a statement, the company said that PowerCo, a leading manufacturer, will build its solid state batteries and deliver them to Volkswagen, the biggest European automaker.
The deal, which is non-exclusive, will see PowerCo manufacture up to 40 gigawatt-hours of batteries. These batteries will be enough to power over 1 million vehicles each year.
This is a good deal for QuantumScape as long as there is a strong demand for Volkswagen’s electric vehicles. Besides, QS will not need to invest vast resources in manufacturing, a process that can take a long process. In a statement, Dr. Siva Sivaram, the CEO of QuantumScape said :
“Combining our cutting-edge technology with PowerCo’s expertise in manufacturing and industrialization, this deal establishes a blueprint for a capital-light business approach and positions us at the forefront of energy storage innovation.
QuantumScape faces headwinds ahead
QuantumScape has made a lot of progress in its battery technology. Its solid state batteries charge for just a few minutes and can have a longer range. According to its website, its batteries can get between 400 and 500 miles (643 and 804km) range with a single charge.
However, the company faces major headwinds above. First, it will have to contend with the rising competition in the battery industry. As I have written before, Toyota has made a breakthrough in the solid-state battery industry.
Toyota has the expertise to take these batteries to the market at scale and is expected to start pushing them to the market by 2027. The company is expected to use its batteries internally as it seeks an edge in the EV industry.
Meanwhile, battery technology has improved significantly in the past few years. For example, Lucid Group’s Air product has a range of 410 miles while Chevrolet Silverado has 400 miles.
I recently wrote about China’s BYD, which has unveiled a hybrid vehicle with a 2,000 kilometer range. Also, China’s CATL is moving ahead with its solid state battery development and is expected to start manufacturing by 2027.
Therefore, the solid state battery industry is expected to get more saturated in the coming years, which will lead to lower prices.
The other risk is that Volkswagen, its biggest customer so far, is not doing well in the EV industry. Its most recent results showed that its combustion engine vehicle sales rose by 4% in the last quarter to 1.97 million units. Its EV sales dropped slightly to 136,400, meaning that it is having major challenges in the sector.
QuantumScape stock price forecast
The daily chart shows that the QS share price has done well in the past few days. This rebound happened after after the stock formed a falling wedge chart pattern, a popular bullish sign.
The stock has now soared above the 50-day and 100-day moving averages while the Relative Strength Index (RSI) has moved to the extremely overbought point at 85.
Therefore, I suspect that the stock will rise again on Monday and then pull back as sellers attempt to fill last week’s gap. It will also happen as some investors start taking profits. If this happens, it will likely drop to the key support level at $6, which is about 25% below the current level.
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