(Veteran tech columnist Jon D. Markman publishes Strategic Advantage, a lively guide to investing in the digital transformation of business and society. Click here for a trial.)
As crazy as it seems, Apple ( (AAPL) – Get Report) is actually going to make an electric car. This is how investors should play this development.
According to a report Wednesday at Bloomberg, the iPhone maker will partner with Hyundai and its Kia Motors subsidiary to make as many as 100,000 electric vehicles annually beginning in 2024.
Speculators should buy battery research businesses like QuantumScape Corp. ( (QS) – Get Report).
Plans to build the Apple car have been on and off again for years. Managers at the Cupertino, Calif.-based company have been toying since 2014 with the idea of an autonomous EV. Project Titan was supposed to be Apple’s self-driving EV for the luxury car market, the iPhone of that segment so to speak. The concept was on brand and ambitious. It was also naïve.
Apple product managers had no experience with automotive supply chains or autonomous vehicle software. An arrangement with Hyundai would plug some of the product development holes.
Ming-Chi Kuo, a top analyst with an impeccable track record predicting big Apple corporate developments, says the company will build its new vehicle using the Hyundai E-GMP electric car platform. In addition to middling acceleration and range, the promise of E-GMP is rapid charging. Hyundai product managers claim the platform can charge to 80% in only 18 minutes.
Fast charging is a legitimate innovation. While Tesla ( (TSLA) – Get Report) EVs are best in class in terms of performance and range on a full charge, waiting for electric cars to recharge has been a sticking point since the first Tesla roadster rolled off the assembly line in 2008.
QuantumScape is building battery technology to make true fast charging a reality.
The San Jose, Calif.-based company is developing a solid state lithium metal battery that could be used in everything from EVs to smart watches. The advantages over current lithium ion technology is stability, safety, greater power storage and lower production costs. That’s the theory.
In reality QuantumScape has never been able to make solid state batteries bigger than the average Apple Watch cell. What the company does have is great science, the backing of a Bill Gates fund and Volkswagen, the world’s largest automobile manufacturer.
Investors were won over by the science.
QuantumScape was founded in 2010 when Jagdeep Singh, a computer science engineer and Fritz Prinz, a Stanford University professor began working on solid state battery technology. A year later the pair had a research unit in place and the backing of Volkswagen. Originally the German carmaker agreed to invest $100 million to establish joint production. In June 2020 the company invested another $200 million to accelerate development.
Bill Gates became a QuantumScape investor through his Breaking Energy Ventures fund. In a 2020 Gates Notes blogpost, the Microsoft ( (MSFT) – Get Report) founder noted that solid state batteries will change the trajectory of EVs and greenhouse gas emissions. He surmised that the technology developed by Singh and Prinz was miles ahead of the competition.
As a public company QuamtumScape has been all over the map. Shares began trading at $10 in August 2020 when the company merged with Kensington Capital Acquisition, a special purpose acquisition company. The combined business was infused with $1 billion in financing from the Qatar Investment Authority and Volkswagen. By January, the stock zoomed to $132.70.
Today the stock trades in the $45 area. That is likely to improve due in large part to Apple getting into the EV business.
To be clear, there is no indication that Hyundai will use technology from QuantumScape. That said the fast charge storyline will change the EV investment narrative away from performance and range. Given its science, partners and investors QuantumScape is likely to be a big part of that conversation. Investors will vote with their wallets.
Shares are attractive here for speculators.
