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Motley Fool Issues Rare “All In” Buy Alert

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QuantumScape (QS 4.50% ) stock surged on the last trading day of the week and rallied as much as 5.5% within the first hour of the session. As of 2:40 p.m. ET Friday, shares of the electric vehicle (EV) battery start-up were still trading 3.9% higher.

There was nothing new from QuantumScape Friday, but two other battery manufacturers bagging multibillion-euro deals from a luxury automaker put a spotlight on the company.

German luxury auto giant BMW (BAMXF -2.11% ) (BMWYY 2.31% ) revealed on Friday that it had placed multibillion-euro orders with Contemporary Amperex Technology (aka, CATL) and EVE Energy to produce cylindrical battery cells to power new EV models it expects to launch in 2025.

Both of those suppliers are based in China, and CATL is also the world's largest EV battery manufacturer.

Investors' focus, though, is on the kind of battery cells that BMW has opted for. By choosing cylindrical cells, BMW is diverging from the prismatic cells it has used so far as it strives for higher energy density, longer ranges, and faster charging. That's also exactly what QuantumScape is targeting with its solid-state lithium-metal battery cells.

QuantumScape is building single as well as multilayer cells using ceramic solid-state separators. The company claims its technology can build cells with 50% to 80% greater density than traditional lithium-ion batteries, and that can be charged from 10% to 80% in less than 15 minutes.

BMW's move underscores the automotive sector's growing focus on more low-cost, efficient EV batteries with higher energy density. That also hints at huge growth potential for QuantumScape if its technology can deliver as promised.

QuantumScape has a long-standing partnership with Volkswagen, and is working with three other large automakers that it hasn't revealed the names of. The company expects to start pre-pilot production in 2023, with commercialization coming in 2025. That still leaves a lot of room for errors for QuantumScape, but on Friday, some investors willing to accept the risks took their cues from BMW's latest move and bet on the EV battery stock.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen AG. The Motley Fool recommends BMW. The Motley Fool has a disclosure policy.

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