QuantumScape Corporation (QS) Earnings Call Transcript & Summary

Hello. I'm Chris Dekmezian, Principal Product Lead at QuantumScape. Today, I am joined by Daniel Braithwaite, Senior Director of Cell Manufacturing at QuantumScape and Venkat Viswanathan, Associate Professor, Mechanical and Aerospace Engineering at the University of Michigan. Daniel, can you tell us a little bit more about your work here at QuantumScape?

Thanks, Chris. Yes. So as you mentioned, I am the Senior Director of Cell Manufacturing, what that means is I'm responsible for design, process development and assembly. I've spent almost 2 decades now in the energy industry, 3 years here at QuantumScape. And originally, back in school, I was a student of Professor Fritz Prinz, who is a co-founder of QuantumScape.

Venkat?

Yes. I'm a faculty member at University of Michigan. I've worked on batteries for a long time and also been a technical adviser at QuantumScape for a while and a member of the Scientific Advisory Board at QuantumScape.

Before we start, as a public company, I'm obliged to tell you that any forward-looking statements, such as projections of our technology performance, are subject to risks described in our SEC filings. If you've been following QuantumScape news, you'll remember that we introduced a new FlexFrame battery format. We also promised that we'd share more information on this innovative new format. Well, today, we're excited to do just that. Currently, lithium ion batteries are produced in a variety of formats. Venkat, can you take us through these form factors?

Yes, sure. So lithium ion batteries are primarily produced in 3 formats. They're usually either put in a cylindrical case or a prismatic case or in a pouch cell. These all strike various kinds of trade-offs in being able to have a higher fraction of active material in thermal, mechanical and electrical aspects. Now when you move to lithium metal batteries, that introduces new challenges. One of the main challenges is the fact that you now have very large volume expansion and contraction, [ uni ] actually in one direction, when you discharge and charge. That's very different than what you have with lithium ion cells where the amount of contraction and expansion is only of the order of a few percent. So managing this makes the challenge of designing the cell format for lithium metal batteries quite unique and different from what we have for conventional lithium-ion batteries.

Thank you, Venkat. As part of the product team here at QuantumScape, I'm intimately familiar with our product road map as we work towards what our customers require. We recently introduced this new format, FlexFrame. Daniel, can you talk a bit more about FlexFrame and how this new format addresses these challenges?

Sure. Yes, absolutely. So as Venkat mentioned, lithium metal batteries expand and contract, so they grow and shrink in thickness during charging and discharging. The fact that the anode is pure lithium metal with no host material to house the lithium ions is what gives lithium metal batteries, a lot of their desirable properties. But that also presents some unique challenges when designing around this expansion and contraction behavior. To address this challenge, we created FlexFrame. In some ways, FlexFrame is a hybrid between a pouch and prismatic battery, which is engineered to give our lithium metal batteries, the environment in which they performed best. The Flex part of FlexFrame is this flexible, movable interface that provides for the expansion and contraction of the active stack from the charge and discharge cycle of lithium metal batteries and the frame part of the concept provides an internal structure that supports the flexible laminate and enables easy handling and stacking of the batteries into modules for automotive and other applications. That's why we call it FlexFrame. We're introducing a new category of battery cells, which combines elements of both pouch and prismatic batteries that accommodates the unique behavior of solid-state lithium metal batteries, so that we can provide the higher energy density, faster charging and safer cells that we believe differentiate QuantumScape batteries from others on the market. It's important that FlexFrame is a hybrid of 2 mainstream approaches to battery packaging because we're able to leverage the tools and materials that are already available in the battery industry. We can use readily available pouch laminate materials, conventional sealing tools and conventional self-stacking approaches to do the assembly. Of course, there are some nuances that are different because of how our technology works. So we don't do it exactly the same as how others would do it. But we can leverage a lot of the same supply base, vendor capabilities and general infrastructure that's available to the broader battery industry. Our ceramic separator is a groundbreaking innovation that's pretty unique in the battery industry. So that's involved a lot of new material and process development. But for the rest of the battery, we're trying to leverage as much of the existing infrastructure in the battery industry as possible. We believe that reduces our risk to execution and should help us get to market faster.

Thanks, Daniel. So Venkat, what does having a lithium metal anode mean for fast charging?

Yes. So that's very interesting. Conventional lithium-ion batteries are limited by fast charging because of the problem of plating lithium. Lithium metal batteries work by operating by plating lithium metal. So this presents a unique opportunity for lithium metal batteries to have much higher fast charging. Of course, that means that when you can charge fast, say, in 15 minutes, that also leads a thermal burden on the battery, that means that you have to figure out a way to get the heat out. And so I think that presents sort of thermal challenges that needs to be addressed in order to enable fast charging that is enabled by the fundamental material signs of lithium metal batteries.

Yes. Exactly. Right. So fast charging is a key benefit of our lithium metal solid-state battery. But fast charging also requires an increase in the performance for thermal management of the system. The battery generates heat during charge and discharge cycles and it's that much more important to dissipate the heat during fast charging. So those of you that own an EV probably know that your vehicle has a sophisticated system that manages the temperature of your battery pack for optimal performance. And that, that thermal system in your vehicle is designed around the specific properties of the battery that it's supporting. We're seeing different automakers are taking different approaches to thermal management, much the same way that internal combustion engines took different approaches to their engine designs. And I think we're still in the early days of what EV thermal management systems will look like. So it's an exciting time to be introducing a new tool or building block into the automakers' toolkit that allows them to tackle the challenge of thermal management in new ways. FlexFrame provides for efficient transfer of heat throughout the cell through the size of the cell and out the back face. We believe that this is the best way to conduct heat in and out of the cell and control the temperature during charging. But the thermal system of a vehicle is in part dependent on the properties of the cell because that's where the heat is generated and in part dependent on the design of the system around the cell. So we're currently working with our partners to develop and validate the thermal management systems, which include ourselves in vehicle pack designs, and I'm excited to see the results of these efforts. In a lot of ways, we're still in the early days of the EV industry. So new designs and new concepts will continue to be developed. And we're excited that FlexFrame is now part of the solution space for designing EVs. And we're looking forward to the day when a vehicle using FlexFrame cells, which capture the benefits of our higher energy density, safer and faster charging cells is out on the market.

Thanks for that great explanation, Daniel. Venkat, can you tell us when you think about the FlexFrame?

Yes, sure. As a material scientist who has been working on lithium batteries for a long time, I've always wondered sort of what the right cell format should be for accommodating this very large volume expansion and contraction that is produced because of the fact that you don't have now a hosted anode. So it's very exciting to see this new design. And I think it'll be very exciting to see how this manifests in larger format [ multi-amp ] power pouch cells and how that plays out in modules and systems in automotive applications.

Absolutely. The A0 prototype cells that we deliver to customers were in the FlexFrame format. And we were very pleased with some of the results that we've seen, achieving 1,000 cycles with greater than 95% energy retention. Venkat, can you tell us what these results mean for the industry?