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The slowdown in demand for electric vehicles is temporary, US battery executives insist, as strong clean car sales in the second quarter in North America suggest drivers remain eager to go green.
This week, battery maker QuantumScape’s shares surged 52 per cent following its disclosure of a $130mn payment from Volkswagen for technology royalties.
Shares in QuantumScape, which makes solid-state batteries rather than conventional EV lithium-ion batteries, had fallen since going public in 2020 via a blank-cheque company.
The announcement was a rare bright spot this year for US battery makers, whose lofty valuations have crumbled amid slowing EV sales and increasing competition for Chinese suppliers such as BYD and CATL.
“I would be foolish to say that I am not worried about the Chinese competitors,” Siva Sivaram, QuantumScape’s chief executive, said in an interview.
The company’s development of solid-state batteries will give EV cars longer range and faster charging times versus the lithium batteries made by Chinese or other competitors, Sivaram argued. But Wall Street analysts have said solid-state batteries have an uncertain path to commercialisation.
The deal with Volkswagen gives QuantumScape about one to two months of free cash flow, Morgan Stanley said in a July 11 report. Volkswagen previously invested $300mn in QuantumScape and controls about 25 per cent of the voting power at the company, Morgan Stanley said, adding that there is no specific timeline for the potential mass production of its battery cells.
“The automotive business has these big ups and downs,” Sivaram said about the sluggish EV sales. “Yes, there is surely a blip. We just have to ride out these blips.”
Tesla, the world’s largest EV company, this month reported a second consecutive decline in quarterly vehicle sales.
But after “a shaky start” to the year, North American EV sales increased 10 per cent in the first six months of 2024 versus last year, according to Rho Motion. Ford said this month its EV sales were up 72 per cent in the first half of the year, making it the second-largest EV seller after Tesla.
Still, battery business valuations have fallen from the market’s 2021 heyday. Silicon-based battery developer Sila Nanotechnologies, which was valued at $3.3bn in a 2021 funding round, raised $375mn in a June fundraising that Joe Fath, a portfolio manager at repeat investor TRowePrice, said was “clearly a down round”.
“The folks who are participating, there is conviction and belief that all ground transportation is going to go electric,” Gene Berdichevsky, co-founder and CEO of Sila, told the Financial Times. Another of Sila’s repeat investors, Sutter Hill Ventures, made some of the first investments in chipmaker Nvidia and remains on its board, Berdichevsky said.
In EV sales, “we are in an air pocket right now,” said Fath, but he added that the lower valuation for Sila “is not a knock on their progress. It is a knock on the world we were in versus the world we are in today. When you go through environments like this, you have to have a stronger stomach.”
