QS Stock Alert: QuantumScape Surges as Volkswagen Doubles Investment in Batteries

QuantumScape (NYSE:QS) shares rise over 25% after the company announced it has reached an agreement with battery company PowerCo, which is wholly owned by Volkswagen (OTCQB:VWAG).

The agreement states that PowerCo can use QuantumScape’s technology platform to mass produce batteries once QuantumScape has “achieved technical advances and paid certain royalties.” These technological advances will be used to manufacture the QSE-5, QuantumScape’s first planned product.

“Under the non-exclusive license, PowerCo can produce up to 40 gigawatt hours (GWh) per year using QuantumScape’s technology, with the option to expand to up to 80 GWh per year. That’s enough to equip about one million vehicles per year,” QuantumScape said.

The new agreement replaces a previous battery manufacturing joint venture between QuantumScape and Volkswagen.

Volkswagen has been working with QuantumScape since 2012 and invested $100 million in the company in 2018. It added another $200 million in 2020 and currently owns 17% of the company.

QS share: QuantumScape signs battery contract with Volkswagen’s PowerCo

The two companies will join forces and form a joint team that will enable PowerCo to manufacture batteries using QSE-5 technology. Jointly developed intellectual property will remain jointly owned.

Upon achievement of certain technology milestones, PowerCo will pay QuantumScape an initial royalty payment of $130 million. Future royalties will be credited toward this payment.

“QuantumScape’s technology is approaching a critical stage where PowerCo’s expertise, resources and global factories can facilitate the transition to industrial-scale production,” said Frank Blome, CEO of PowerCo.

As part of the agreement, Blome has agreed to step down from QuantumScape’s board to focus on his responsibilities at PowerCo. QuantumScape and Volkswagen currently have an agreement that allows Volkswagen to appoint two directors to QuantumScape’s board. QuantumScape plans to announce Blome’s successor in the coming months.

The agreement provides a huge boost to QuantumScape and QS as the company works toward the release of the QSE-5. The company believes the agreement will help it achieve gigawatt-hour-scale production of solid-state technology used in electric vehicles (EVs).

The excitement isn’t over yet, though. QuantumScape will report its second-quarter results on Wednesday, July 24.

At the time of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the responsible editor had no (direct or indirect) positions in the securities mentioned in this article..