QuantumScape Corporation

QuantumScape Corporation

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QuantumScape Corporation (QS) Q1 2021 Earnings Call Transcript

Published at 2021-05-12 01:24:04
Operator
Good day, and welcome to QuantumScape's First Quarter 2021 Earnings Conference Call. John Saager, QuantumScape's Head of Investor Relations, you may begin your conference.
John Saager
Thank you, operator. Good afternoon, and thank you to everyone for joining QuantumScape's first quarter 2021 earnings conference call. To supplement today's discussion, please go to our IR website at ir.quantumscape.com to view our Shareholder Letter. Before we begin, I want to call your attention to our Safe Harbor provision for forward-looking statements that is posted on our website and as part of our quarterly update. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statement for the reasons that we sight in our Form 10-K and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape's Co-founder, CEO and Chairman, Jagdeep Singh, and our CFO, Kevin Hettrich. Jagdeep will provide a strategic update on the business, and then Kevin will cover the financial results and our outlook in more detail. With that, I'd like to turn the call over to Jagdeep Singh.
Jagdeep Singh
Thanks, John. Welcome to our earnings call for the first quarter of 2021. Earlier today, we published a letter to our shareholders, summarizing the major developments from the last quarter. I won't repeat all of the contents of the letter here, but I would like to call your attention to a couple of key highlights. At the end of March, we completed our VW milestone, which required that we deliver to VW for testing in their labs in Germany, cells of a specific form factor and performance level. The form factor consisted of near production-intent separator thickness and area, and the performance level requires that the cells operate at predetermined rates of power and temperatures, for a specified number of cycles. We were pleased that we successfully met this milestone, as this represents a critical step towards industrial innovation, and also unlock an additional $100 million investment from VW. On the technical front, we are pleased to report that the team has made four-layer cells in the larger 70x85mm form factor, that we laid out as a target on our last earnings call. As the data in our Shareholder Letter shows, early results in the testing of these cells looks promising, approaching 500 cycles to-date with excellent capacity retention and with the cells continuing this cycle. These results from four-layer commercially relevant-area cells indicate we are on track to meet our eight to 10-layer cell milestone by year-end, followed by prototype samples into commercially relevant form factor, containing dozens of layers by 2022. We also report today, data from testing of our cells with zero externally applied pressure. In other words, one atmosphere of total pressure in coin-sized cells. This is noteworthy because other solid state lithium-metal efforts that we are aware of, have generally required pressure through this cycle. However, delivering very high pressures, as some solid-state cells require, adds cost and complexity to the system. As the data in our Shareholder Letter shows, the cells achieved over 1,000 cycles with good capacity intention, even with zero fly applied pressure. We did this work in coin-sized cells, which is a platform we use for early research developments. And while there was more work to be done to replicate the results in larger-area cells, achieving these results in this form factor is an important first step toward introducing this capability into larger cells. We believe that being able to manufacture cells that require zero applied pressure could enable us to address markets beyond automotive, such as consumer electronics, where applying pressure is impractical due to size constraints, and while not necessary for automotive applications, could simplify automotive module and pack design in the future. On the manufacturing front, last month we signed a new long-term lease on an approximately 197,000 square foot facility, near our headquarters in San Jose, that will house our QS-0 pre-pilot line, as well as other R&D activity. We plan to move into this new facility in the fourth quarter of this year. Finally, we raised $478 million in gross proceeds and a follow-on offering in the quarter, of which approximately half will be used to fund the expansion QS-0 to over 200,000 cells per year. Additional capital from the equity offering will be applied to fund the buildout of QS-1, our joint venture with VW, which will target commercial production in the 2024 to 2025 timeframe. We've not accomplished two of the four previously announced milestones for 2021. The VW milestone and securing a facility for QS-0, and have made strong progress towards the third, four-layer multilayer cells in the commercially relevant form factors. Our remaining stated milestones for the year are to complete the development and testing of the four-layer commercially relevant area cells, and then to build eight to 10-layer full-sized battery cells. A few words of historical context, Fritz, Tim, and I started the company over 10-years ago, with a vision of enabling the next generation of electric vehicles. We believe that if we could develop a solid state battery, we could facilitate the transformation of the automotive industry, from internal combustion engines to electrified power trains, enabling a substantial reduction in greenhouse gases. We didn't know when we started whether we'd be successful, we were fortunate enough to have a combination of investors and team members, who were committed enough to this goal, whether the ups and downs of the development process. It ended up taking us 10-years, with deep experimentation in every material we could think of, develop our solid state separator, and the associated scale with manufacturing processes. This single-minded focus has served us well in the past, and going forward, we intend to continue being singularly focused on executing to our development plans. We believe if we could do this, we will achieve our goal of building the next generation of value to our customers, positively impacting emissions, and creating significant value for our investors. Based on the groundbreaking results we've shown so far, I remain optimistic about our ability to execute on this vision and achieve our goals. Given this context, with the exception of satisfying tax obligations, I'm committing to not sell any of my QuantumScape holdings at least until we have delivered a prototype in a commercially relevant form factor to Volkswagen. In closing, I'd like to thank all of our employees for the incredible, groundbreaking work they've been doing, and whose commitment to our mission and vision have gotten us to where we are today. With that, I'll hand it over our CFO, Kevin Hettrich, to say a few words about our financial performance, and open it up to Q&A. Kevin?
Kevin Hettrich
Thank you, Jagdeep. In the first quarter, our operating expenses were $45 million, excluding stock-based compensation, operating expenses were $33 million. This level of spend was in line with our expectations entering the quarter. For the full year, we expect cash operating expenses to be in the range of $130 million to $160 million. In terms of CapEx, on a full year basis, we expect to spend between $130 million and $160 million, with about half of that spend dedicated to our $200,000 plus QS-0 cell capacity, as well as tooling and machinery associated with an additional engineering line at our new building. The aforementioned capacity increase of QS-0 enables us to provide more prototype cells to VW, other automotive OEMs and prospective customers in other industries. We intend that QS-0 will establish a mass manufacturing system blueprint. Learnings from the larger QS-0 capacity, we expect to help further de-risk our QS-1 scale up. With respect to cash, we spent $35 million on operations and CapEx in the first quarter. We anticipate the aforementioned free cash flow burn to be in the range of $260 million to $320 million for 2021, is approximately $30 million more than we communicated on our February earnings call, predominantly due to CapEx associated with the expansion of QS-0 capacity. We ended the first quarter with approximately $1.5 billion in liquidity. We plan to end 2021 with well over $1.3 billion, a net increase of over $300 million compared to our liquidity position entering the year. We believe this capital fully funds QuantumScape through initial QS-1 production, and additionally contributes to the subsequent QS-1 expansion. Of course, the pace with which we are able to spend will depend on several factors, including our ability to ramp headcount and the maturity of our production processes, including the level of its automation. Our GAAP net loss for the first quarter was $75 million. Of this amount, $31 million represents the non-cash fair value adjustment of the assumed common stock warrants, in accordance with U.S. GAAP, previously referenced. With respect to share count, I'll be providing numbers rounded to the nearest 0.1 million shares. We ended the first quarter with approximately 389.8 million shares of common stock outstanding, including approximately 12.0 million shares from our March follow on equity offering, and approximately 9.5 million shares issued upon the exercise of assumed common stock warrants during the first quarter. While the technical milestone associated with VW's investment was met in the first quarter 2021, the investment close after quarter end, following the expiration of the applicable regulatory waiting period. Consequently, the 15.2 million shares subsequently issued to VW are not included in the aforementioned 389.8 million shares of common stock outstanding at quarter-end. Similarly, cash subsequently received from VW is not reflected on our Q1 balance sheet. In summary, we're excited with everything we accomplished this quarter and look forward to the challenges ahead. We'd like to thank our investors for their support and belief in our mission. With that, I'll pass it over to John. John? A - John Saager: Thanks, Kevin. As we've done in the past, we will now review a few of our most asked questions from investors during the quarter, before moving to the traditional Q&A session with the cell side of Analysts. Jagdeep, can you explain how you've tested for dendrites? And what gives you confidence that your separator can resist dendrites?
Jagdeep Singh
Sure, John. So the best test of dendrite resistance is actually the cycle lifetime. How long can you cycle under uncompromised test conditions, meaning high current densities and broad range of temperatures? For our single-layer cell, we've shown over 1,000 cycles to over 80% capacity retention, and high rates of power corresponding to one hour charge and discharge, at a temperature of 30 degree Celsius, as opposed to elevated temperatures of 60 to 70, or 80 degrees. Again, this is probably the best test to show resistance to dendrite formation. In addition to that test, we've done additional tests to determine the fundamental capability of our solid state material, such as the latter test, where we charge at a given rate for a given amount of charge, and keep increasing the rate to find out how much stress the material can take. The data we're reporting our battery showcase, show that solid state separator could survive 100 milliamps to send this square, many times higher than what the cell could ever experience in the real world setting. These are some examples of the tests that have given us confidence that our material can impact, resist dendrites in real world configurations.
John Saager
Okay. Great. Next, can you talk a little bit about the different types of temperature testing in our presentations? And why investors will see, for example, the latter testing that you mentioned, was done at 45 degrees Celsius versus our normal sort of cycle life testing, which are done at 30 degrees Celsius. And then there are also some tests done as low as negative 10 degrees Celsius, to show the performance versus traditional lithium ion batteries.
Jagdeep Singh
Sure. So our standard test conditions are to test our 70 to 85 mm area cells, which is the commercially relevant form factor, at 30 degrees, which is near room temperature, at 1C rate, which means one hour charge and one hour discharge, which actually is a relatively aggressive rate of charge and discharge, corresponds to discharging your entire battery pack with hundreds of miles of range an hour, and supercharging it to recharge the battery pack in one hour. In addition to the standard set of data, we report additional data to more fully characterize the forms of the cell. So we sometimes support data at C/3, which is three hour charge and discharge rates, as well as higher and lower temperatures to reflect conditions that the cell might see in the real world. For the latter test, we use 45 degrees, as you mentioned, 45 degrees Celsius, and that's the effect it has on the automotive OEMs that we're working with. The fast charge is most likely to occur when you're just coming off of the highway, and the battery pack is likely already self-heated. The negative 10 degree test that we do is also very important to show how we separate forms in colder temperatures, which is also key requirements for the automotive application. Not that many solid state systems actually can't run well at these cold temperatures, so that data is an important indication of real world applicability. So, the summary is that, we try to test the cells in the standard configuration wherever possible, and where we add additional tests to provide a better sense for how the cell performed in the real world, that's incremental data beyond the base set that we provide.
John Saager
Okay, great. Thanks. Let's talk a little bit about the competition, because I think investors this quarter noticed a difference in the approach between you and some of your competitors, where some of them are scaling up first, and making large numbers of cells on large scale manufacturing equipment, before they've shown cyclists data that meets the automotive requirements of 800 cycle to more than 80% capacity. When their argument being that scaling up is actually the most difficult part of the solid state approach, whereas QuantumScape appears to be taking the opposite there. So, can you discuss these two different approaches?
Jagdeep Singh
Sure, John. Let me back up a step. So there are only a few basic materials that exist relative to making solid state materials. And the three main ones that are popular to use are polymers, sulfide, and oxide. All three approaches had issues. The most fundamental one being an inability to prevent dendrites. A system that can't stop dendrites effectively will never be usable in your car. Unfortunately, some dendrites turn out to be a really hard problem in many groups who are working in the space, but it's easier to try and solve the scale up and size of the self-problem and talk about manufacturing scale rather than solve the fundamental issue of dendrite formation. So our approach is all they end up working at elevated temperatures like 60, 70, 80 degrees or low 85, like C/10 or C/05, which makes it impractical for real automotive applications, no matter how big a cell we make or how much capacity that we are packing. In our view, these approaches represent pathological tenets. One of the fuel particularly that's been used a number of competitors that are talking about scaling up is the sulfide family materials. Unfortunately, besides the dendrite issue we just discussed, the sulfides have an additional serious issue, which is hydrogen sulfide formation. So hydrogen sulfide or H2S is an extremely toxic gas that forms upon contact of sulfides with ordinary air, which contains water in it, the water reacts with the sulfide and form H2S, and a quick Wikipedia search will tell you that H2S can kill at a few hundred counts per million. So it's a very serious issue that needs to get solved in the sulfide based approaches. Now QuantumScape by contrast chose to first make a system that can be shown to meet the basic requirements of cycle life, and high rates of power, i.e. one hour charge and one hour discharge, without requiring temperatures elevated to 60, 70 or 80 Celsius. Having shown this data in December, we've now turned our attention to scaling up. So one last point I want to make regarding fundamental chemistry versus manufacturing skill. I know some people say building a prototype is unique and manufacturing is hard. But I would say it depends on the type of product you're talking about. In the case of a car, I'd agree that making a prototype might be easy, since there's typically no material level of inventions required to make a car. But manufacturing can be hard, because it requires coordinating, the build materials that might have 10,000 parts of it, and ensuring a smooth running supply chain that can deliver each of those parts on time is not trivial. Even one missed part can cause line to stop. But if we're talking about batteries we would have, I would say the chemistry is the really, really hard part. And as evidence, I point to how rare it is to seek fundamental new chemistries over the last few decades, that have entered commercial deployment. And particularly that’s going to be 40-years of work that have gone into solid state materials, with very little commercial success to show for all that work. By contrast, many companies in battery space have shown they can build Giga factories in 18 to 24-months. Because there are no new laws of physics required to build value batteries. For this reason, we chose to focus first on confirming that we had a material, our solid state separator that could cycle on your uncompromised test conditions, without dendrites. And I don’t know if we've shown that, we've turned our business to scaling up the layer count and production capacity of engineering manufacturing minds. We believe this is the only path to making a commercially viable new chemistry, make sure their chemistry works and then focus on scaling up the production of battery, not the other way around.
John Saager
Okay, great. Thanks for the thorough answer. Our last question goes to Kevin. Kevin, what's the total CapEx of QS-0? And how should investors think about this relative to the guidance that you've traditionally given, around long-term CapEx spending, having a one to one relationship with annualized revenues?
Kevin Hettrich
John, thanks for the question. What we have said is that CapEx spend on our new facility accounts for approximately half the $130 million $160 million CapEx spend, we estimate in 2021. We expect a similar magnitude of CapEx spend on the new facility in 2022. QS-0 will be higher in terms of cost per unit capacity than our subsequent QS-1 facility. There are a few reasons for this. The first one-off engineering costs for QS-0 tooling related to QuantumScape's specifications are estimated to be a higher percent of total CapEx cost, and also are not expected to be spread over as higher volume of purchases as for our QS-1 facility. And second, the QS-1 will feature a larger scale tools that offer greater economies of scale. We believe the long-term CapEx per unit revenue targets remain achievable with the benefit of eliminating anode-related production equipment, as our cells are anode free as manufactured. We plan to install in QS-0 same type of continuous flow equipment, assumed in our long-term forecasts, and the future work will be to hit our targets operating that equipment, for example uptime, wind speed, et cetera, to successfully achieve our long-term cost targets.
John Saager
Alright, great. Thanks, Kevin. We're now ready to begin the Q&A portion of today's call. Operator, please open the lines for questions.
Operator
[Operator Instructions] Your first question is from the line of Adam Jonas.
Adam Jonas
Hey, everybody. So first a question about cells delivered to Volkswagen and to other auto OEM customers. I'm reading into your comments that they would have external pressure, I'm just confirming that there may be benefits over time to having zero external pressure. But I just want to confirm that what is required and what is expected from the Volkswagen, within the Volkswagen JV is that it would have external pressure? I'm curious how much that is, and whether the amount of pressure matters in terms of form factor or cost?
Jagdeep Singh
Hey, Adam, yeah, it’s Jagdeep. The cells that we delivered to VW were under the standard pressure that we've been reporting our cells at. And so basically, if you look at all of the data we published, we report the pressure that the cells are under. Now, in the automotive application, delivering pressure is modest amounts of pressure is not an issue because the cells go into modules and modules go into packs, and you can engineer a system that can deliver those modest amounts of pressure without significantly increasing the complexity of the design. It's when you get into incredibly high pressures like 10 atmospheres or above that the system design becomes really complex and potentially expensive. The zero pressure data that we talked about today, is brand new data. This is an additional new result that was not on the publicly stated roadmap that we had laid out. And the benefit there again, first of all, it's an industry first. Generally speaking, solid state systems do require pressure to maintain interfacial resistance at good levels. But the benefit of zero pressure is that you can make the system applicable to applications, where you just don't have the volume to that pressure. So for example, in a consumer electronics application, like a mobile phone, there just isn't enough room to have any kind of pressure delivery mechanism. So the big benefit of zero pressure design, by zero pressure of course, I mean, zero externally applied pressure is still of its -- everything has one atmosphere of natural pressure on it. For the benefit of our approach, it opens up applications like consumer products, which could be interesting applications for our technology. And it does simplify the design of the module pack if you do it for automotive, although it's not required. And that's the key point we're making in our script and our letter.
Adam Jonas
Thanks, Jagdeep. Just one to follow-up for the team. What opportunities does QuantumScape have in either the U.S. or Europe, in terms of government grants or low interest loans, for example, Department of Energy, ATVM loans, as you're in a position with your liquidity and your growth, to be contributing to the economy and adding high tech manufacturing jobs and technology jobs in important areas? I'm just curious in the kind of early stages of the proposed infrastructure bill and things like this, how you're gauging that landscape? And is that something that even if it's not necessary, because it seems you have ample liquidity could be an opportunity that we may see some development as soon as this year?
Jagdeep Singh
Yeah, I can let Kevin take on this specific question about government opportunities. What I'll just preface that by saying is, in general, there are a few key sources of capital for a company like ours, one of course is the capital that we've already got from private investors and public investors that's already on the balance sheet, with obviously similar capital available to public markets in the future. The second source is, of course, partnerships with the key automotive OEMs. What we're doing is so strategic to the automotive sector, that we're seeing a significant interest on the part of the automotive OEMs, to help fund the industrialization of this technology. So obviously, the VW JV is a great example of that, where they've -- obviously, we've announced already they're funding half of the JV that we're doing for our initial deployment. Other OEMs will find this technology to be equally significant. And so that's another source of capital is the automotive OEMs. The third source of capital is, in fact, government incentives and both at the federal level and the regional level. This is not just true in the U.S., but in many parts of the world, recognize how fundamental a transformation of a very important industry we're in the middle of, and they recognize that having a domestic battery industry could end up being a critical part of maintaining their jobs base, as well as their technological base. So obviously, Germany as well as the major manufacturers of cars, is particularly concerned about this. But in general, in the EU, there's lots of countries like that the U.S. under the current administration is essentially arriving at a similar conclusion. So with that as context, let me turn it over to Kevin, maybe Kevin want to say a few words about specifically government level opportunities.
Kevin Hettrich
Sure. Adam, that's a fantastic question. Really, just three things to add to Jagdeep's comment. The first is that what you were noting is certainly the precedent for conventional lithium ion factories, so that if you look at any of the major recent factory announcements, they do tend to be paired with either some level of country or a state or city level support for all the right reasons that Jagdeep laid out. The second point I'd make is that we haven't assumed any of this in any of our historical projections. So if QuantumScape does indeed receive any type of subsidy or government support, that would be upside to any of our plans or projections. And then the final point on their strategic nature, in addition to all the direct jobs being created at the factory, there's all of the strategic jobs created that are indirect as well, both in the tool supply as well as in the rest of the supply chain as well.
Adam Jonas
Thanks very much.
Jagdeep Singh
Thanks, Adam.
Operator
Your next question is from the line of Gabe Daoud with Cowen.
Gabe Daoud
Hey, afternoon, guys, thanks for all the prepared remarks and the Q&A. I guess, I was curious if we could just go back to the four-layer 70x85 test. I guess the pressure requirement and how is that relative to your expectations? And I guess once you start adding the layers here and getting to eight to 10, how do you think that requirement will look like for design of eight to 10-layers? I guess, just trying to think about when, if you think that 6.8 could trend down throughout the rest of this year?
Jagdeep Singh
Yeah, so our experiences has been -- so we currently apply as you know a single digit number of atmospheres of pressure. And, when you apply pressure to a stack of cells, that pressure is distributed to the stack, so you don't increase the pressure as a function of number of layers. The pressure has nowhere to go, so it will literally just go right through the rest of the stack. So it's not the case that, for example a 10-layer cell requires 10 times the pressure. That's point number one. And point number two is the reason why we release the data on the zero pressure results, is to indicate that, in fact, the team is making great progress in an area where there hasn't been a lot of progress historically, which is cycling lithium metal anodes, without the need for any externally applied pressure. And the reason why we think that's interesting is because that does simplify the module and pack level design. So, even though, we believe single digit atmospheres is a design that can be engineered into automotive applications, we think it's a simpler design do not require the pressure, so we will move in that direction, now that we've shown the proof of concept with these initial zero pressure cells. And then also the fact that we will open up additional applications that do not have an opportunity to pressure like consumer electronics.
Gabe Daoud
Thanks, Jagdeep. That's helpful. And then maybe just as a follow-up, Volkswagen on their Power Day mentioned going to uniform cell route prismatic approach. Could you -- for I guess, 80% of the needs, can you maybe just talk about your expectation around cell design? And whether or not you could go from passive prismatic to maybe accommodate VW, or would the pouch design perhaps represent the additional 20% of demand from Volkswagen over time?
Jagdeep Singh
Yeah. So, I think the key point there is that, when we say commercially relevant form factor, we mean a design that can in fact be engineered into a module and back at the carnival, and the key there really is to have enough layers and enough energy density in a given form factor. So if the form factor is too small, then what happens is the packaging and inactive materials start to dominate the cell and the energy density, i.e. what watt hours per unit drops. So as we've mentioned on previous calls, we believe the this deck of size, a deck of cards-sized form factor that we've been talking about with dozens of layers in it, does in fact, allow us to hit the 1,000 one hour per liter target that we have. And so with that, it hasn't been commercially relevant to OEMs actually, Volkswagen. You're right that there is a longer-term desire on the part of not only VW, but many other OEMs can move to a form factor that's somewhat wider than the debit card size form factor we've shown. And that's something that we will address in the future. But for now, our current form factor target for commercial development designs remains, roughly speaking that deck of cards style form factor, because in our models that can in fact, get us to the 1,000 hour per liter energy density target. So there isn't a need to try to build a larger module form factors, which then require additional development to commercialize.
Gabe Daoud
Got it. Thanks, Jagdeep. Thanks, everyone.
Jagdeep Singh
Thanks, Gabe. Appreciate it.
Operator
Your next question is from the line of Rod Lache with Wolfe Research.
Rod Lache
Hi, everybody. First question, just clarification, the zero pressure cell that you described, that does not have any liquid in it, Jagdeep?
Jagdeep Singh
Hey, Rod, good question. I want to clarify -- really glad you asked this. So, when we talk about solid state, what we're talking about is two things. One is that there's a solid state separator. So the separator is a dense material, unlike today's cells, which have a porous separator made out of typically organic material, like polypropylene. We've got a polyolefin material. Those materials don't conduct by themselves. Lithium ions can't move through those kinds of plastics. So instead, what they do is they have holes in them. And those holes are flooded with the liquid electrolyte. The liquid electrolyte towards the cathode, the separator, as well as the carbon particles in the anode. So it's really everywhere in the cell. Whereas in the solid state design, that's the one we're talking about, we eliminate the parts of it are replaceable, it's pure, denser, and that there's no holes in it. And so the lithium ion to actually move through the atomic lattice of the separator itself. And then, second point is between that solid separator and the pure metallic lithium, there is no liquid. So that's just a direct interface of solid to solid. In our cathode, there is an organic material, which consists of a polymer added liquid. That cathode is limited -- that's the capital item, its limited to the capital. And because we have the ceramic separator, that liquid doesn't actually make its way to the anode of lithium metal. If it did, you would actually see the cycle life fade much more quickly than what you're seeing with our cell. In our cells, we've shown as you know, 1,000 cycles of cycle life with well north of 80%, in many cases, 90% capacity retention, so significantly above the spec. And that we don't believe will be possible, if you use a liquid cell, because liquids are known to react with metallic and this is the whole problem with liquid base cells and lithium metal is, that chemical reaction between liquids and lithium metal results in a loss of both lithium and the liquid, as well as a buildup of reaction side products that raise the impedance or resistance of the cell. And as a result, the cell cycle life starts to fade within 300-400 cycles, hit the 80% and starts dropping off. So the key to solve this is that a salt separator does not have any holes in it to allow any liquid penetration. And B, a lithium metal anode that makes a direct interface with that separator without the need for any liquid in the middle.
Rod Lache
Yeah. Okay. That's helpful. Thanks for clarifying that. You've made a comment in the letter Jagdeep about the development tasks ahead. A couple of them obviously related to manufacturing like throughput, yield and uniformity. Can you talk about the path forward on that? What kinds of metrics are you targeting for these? And, how challenging are they?
Jagdeep Singh
So, yeah, those are obviously key requirements for any high volume scale of process. And then we went through a similar process in my last company, which was making an optical photonic integrated semiconductor chip. And yield is one of the things that just continue to increase, as wide as you learn more about the process and how to get uniformity, how to have fewer defects, fewer contaminants in your lab and your manufacturing floor, your yields starts to increase. Throughput is a function of the tools that you have and the processes that you have. So if you have things like batch processes in there with a lot of human intervention, those tend not to be scalable, which is why the design that we have to make our solid state system is one that uses continuous flow processes. So there's two steps in the manufacturing process. Step one is to make what we call a green tape to cast the material, that's done on continuous for coders, that are not too different from what's done for today's cathode electrodes in value factories. And the second step is a heat treatment step. And that step too is a continuous flow process, where the firm just run through continuous flow, heat treatment tool, that ends up processing those at the right -- with the right heat profile. So those are the kind of things that we're doing, and that we will be keep doing. At the end of the day, the measurement of that comes out to, are we able to deliver the cells that we are planning on delivering to our customers. So like, if we can, for example, have a QS-0 for these 200,000 sellers a year like we're planning on, that would be an indicator that all those metrics are in fact, tracking to our goals.
Rod Lache
Yeah, that makes sense. And just lastly, I was hoping you might be able to pass along what you're hearing from other OEMs, aside from Volkswagen on the developments, since you've made them public? Some of them seem to still be very focused on silicon anodes with conventional separators and electrolyte. Are they conveying that that's kind of a temporary solution? Or are you hearing more interest from others at this point?
Jagdeep Singh
Well, I mean, what we're hearing is exactly that, that people, clearly silicon is here today, and has been here, frankly, for a while. So, one thing to start, a couple points. Why is it certain issue today, there's always lots of music, [ph] but I think there's of the people that we've spoken to there is general agreement that looking at metal is the end game, in fact, those are some of the words that we hear from the OEMs directly. Because you can't have a theoretically higher energy density or specific energy anode, than pure lithium metal in the sense that lithium metal doesn't have hosted -- any holes material. So all we have, lithium anode is the same lithium cycling back and forth. Assuming of course, it's a zero lithium cells, and there's no excess lithium in there to help the nucleation of that lithium anode. So with [Indiscernible] and only lithium in the anode, as well as cycling back and forth, there's no silicon, no carbon, nothing else to weigh you down or take up space. Now, the second point about Silicon is the reason why silicon is a little bit a nebulous thing to get your arms around is because, when people takes a look at anode today, what they're really talking about is some amount of silicon that's been put into a carbon anode. So it's a carbon anode, with some level of silicon in it. It's never 100% pure silicon. And the reason for that is, as you I'm sure know, is a pure silicon absorbs a lot of lithium and expands by a factor of four, roughly speaking, and then contrast again, when that lithium goes out as a solid discharge. So they've been charged and discharged. Lithium is literally expanding and contracting, like a sponge soaking up silicon is a standing [indiscernible] lithium ready to go. And over repeated recycling, that silicon pulverizes itself, resulting in a loss of capacity. So, the only way to prevent that, that people come up with is to have a small amount of silicon in the carbon anode. And so there's a direct trade off with silicon anode lithium how much silicon you have, which corresponds to energy density and your cycle life, which is also an validation of that sort of thing. So, when people say silicon, it's important to ask, well, how much silicon are you talking about? Because 100% silicon solution to our knowledge has never been shown to have any kind of decent cycle life. And this is one of the unfortunately one of the things that sometimes not reported in a way that's easy to understand, some companies, uncircumcised, sometimes report data, where it show energy density of a silicon anode with a higher amount of silicon in it, and then they'll show a cycle life slide with a lower amount of silicon in it. And it leaves the reader uncertain as to whether it's the same cell or not. It's important to kind of be able to ask those questions to really understand what was being said. So, the net of that is that yes, the OEMs that we're talking to are all looking at silicon as an intermediate step towards the end game of a pure metallic lithium anode, if that can be done. And obviously, we haven't yet shipped them pure lithium cells to put in their cars. But, if we do that, then we expect to see very strong interest in that from multiple OEMs, as opposed to continue to use silicon anodes.
Rod Lache
Great. Thanks, Jagdeep.
Jagdeep Singh
Thanks, Rod.
Operator
Your next question is from the line of Mark Delaney with Goldman Sachs.
Mark Delaney
Yes. Good afternoon, and thanks very much for taking the questions. Maybe first to follow-up on that last question. The Shareholder Letter talks about continued strong inbound interest from multiple prospective customers. Could you elaborate any more on that in terms of how the inbound interest the company's seeing currently, maybe compares to how it was as of the last time we spoke about 90-days ago? And what it may take in order to win an additional customer beyond VW?
Jagdeep Singh
Yeah. Hey, Mark, thanks for the question. We obviously can't comment on any deals that aren't announced. But we have said that there's been a lot of interest from a lot of players. Since we announced [Indiscernible] in December, since we announced our Q1 earnings call with the multiyear results, we've seen continued increase in interest both sides of the level of interest and the amount of interest, with number of players out there in our technology solution. And to the candidate right now, we really expect to be supply constrained in terms of both near-term, delivery of test cells to these OEMs, as well as the prototype samples that will come off of our two SEO product line. We did, as you know, decide to expand with QS-0 pipeline, more than double its capacity that was keeping a reasonably offering last quarter. But even with that added capacity, we expect there will be an allocation, which is a good thing to have, in some sense. But it's still a problem in that, that totally we can't serve everybody's needs. The reality is, Mark is that we're as a company that's still emerging. We won't have the management bandwidth to have too many customers, in terms of our ability to support them. So we're going to have to pick a small number of key partners anyway. But in terms of the amount of interest we're seeing, I would say it's very broad, as you would expect. I mean, if you have a technology that has the kind of features we're talking about, higher energy density, and the ability to charge more quickly and sort of the safety benefits in a solid state separator, and the cycle life that we're talking about, why wouldn't it be attractive. So our key challenge here is delivering enough cells to all these players to kind of give them what they need and wind up really prioritizing the ones that we think will be the best fit for what we're doing.
Mark Delaney
That's helpful. Thanks. My second question was trying to better understand the comment in the Shareholder Letter. You talked about targeting commercial production in 2024 to 2025 timeframe. And I'm hoping to understand how that compares to the Analyst Day presentation showing about a quarter of a gigawatt hour being shipped in 2024. And I think that was pretty early production. So maybe there's no change. But just trying to better understand the current phrasing compared to what had been previously articulated in the financial plan? Thank you.
Jagdeep Singh
Yeah, I think you pretty much articulated it well. If you look at that Analyst presentation the model that we had there, show relatively small revenue in '24 wrapping up in '25. And that's what we're referring to when we say '24 to '25 timeframe.
Mark Delaney
Okay. Thank you.
Operator
Your next question is from the line of Ben Kallo with Baird.
Ben Kallo
Thank you, guys. Jagdeep you do have a very good job of explaining stuff. It's very complicated to lay people like me. You said something about the cells and ramping up a battery factory 18 to 24-months. And I was wondering just how the differences in the form factor, as you go from a cell to a battery and put that into a pack, and the kind of equipment that takes. And I expected or I would assume that you did diligence with VW about that step, and taking all those different form factor cells that make you into a pack. But, if you can just maybe explain a little bit more, like, make it like, [indiscernible].
Jagdeep Singh
No, absolutely, a great question, Ben. So a couple of points to give you a context, before I even answer the question. In terms of the factory itself, much of the tools that go into the factory are actually going to be very similar to what goes into lithium ion conventional factory. For example the cathode line will be virtually the same. It's going to be cathode coders and the same types of suppliers. The cathode, active material will be very similar to what's already used in today's or the updated generation of lithium ion batteries. The anode line, as you know, it doesn't exist, because there's no silicon, no carbon, not even an extra layer of lithium on the anode acuity of zero lithium metal that forms [Indiscernible] keep the same cathode line and we eliminate the anode line. The only difference then is that where the conventional battery buys separators, from separator suppliers, we make our own separator. However, even there, we make that separator using tools that are scalable and continuous low dimensionality. So there's a two-step process to making that separate. The first step is the casting process, very similar to what's used for cathode coatings. So it's already obviously very scalable tools. And the second step is the heat treatment step. But that too use a continuous flow treatment to where things are running through this conveyor belt, and being handled our employee in a continuous flow fashion. So they're both a scalar processes. The second part of the question is, how is the battery or the battery pack process different from the form factor. So, luckily -- so when we started the company, we actually thought we might end up making both cells and packs. We since realized a couple of things. One is that making cells is hard. So we decided to focus on sales, and not take on additional tasks beyond that, like the pack. But secondly, we also found that the OEMs we were talking to very much wanted to control the pack themselves. Because the pack is an integral part of the vehicle design itself. It's integrated very tightly, mechanically, thermally, electrically via software. So they bring the cell to package as part of the car. The nice thing about making cells, however, cells that are very simple interface, a set of a two terminal device, with not a lot of other complexity beyond it. And so when we make cells, it's easy to hand off to the OEM. The OEM is the one who makes packs. So, really, our only responsibility is the design phase to make sure that we communicate the external behavior of the cell, that means its electrical, interface, the thermal behavior, the interface to the vehicle, which was a BMS. But that's all we do, is we actually deliver you parts of its cells. So we just never sell to them and they have delivered engineered packs that can accept our cells and build a full pack with them.
Ben Kallo
I guess, just around that question out. So someone's already -- the VW, and then your next OEM partner is already developing that pack, right to match the cells. And the next cell that you do looks bigger?
Jagdeep Singh
Yeah, so actually, the way it works is that it's a collaboration. So the OEM tells us what their module and pack looks like, and what kind of cells would fit that module pack. And we designed cell that designed to fit into that module and pack with minimal change. So in fact, this is why, when people ask me so how many layers on your cell, we say the actual data count depends on the particular OEM, because every OEM has a slightly different or in some cases quite different module and pack architecture. But we actually modify our cell design. So when I talk about the commercially relevant form factor being roughly the size of a deck of cards, the reason why I say roughly, is because the precise dimensions may vary by OEM, in order to more cleanly fit into their module and pack.
Ben Kallo
Got it. That's very helpful. So congrats on raising money. That was good. Could you talk maybe about -- you mentioned the VW and I think the milestones in the report. Just housekeeping, is there another milestone that triggers capital injection?
Jagdeep Singh
Well, no. So the answer is, that particular milestone was set back roughly a year ago when we entered into our series F. We've been with them since before, obviously, we were a public company, we're still a private company. And they were participating in the private round that we were doing at the time. And they had committed to invest $2 million more. The first is -- and we see of course, COVID had already started. And so, the automotive OEMs have seen a significant drop off in their revenues and cash flows. And they have requested the idea of having a two tranche investment approach. Tranche one would be in December with no closing conditions, just simply a time delay to allow them to manage COVID impact. And the second tranche, they wanted to have that tied to what they thought was a really significant milestone on the path to commercialization. And that milestone as we report in our Shareholder Letter had to do with a specific form factor, and specific test conditions. And the form factor there was important because that specified near production thicknesses and areas for the separator itself. So that gives them confidence that in fact, we can make the separators in the right level of thickness to be commercially viable and achieve our energy density goals. And then on the test conditions, they specified a specific test of such conditions relative to temperature, and rate of power, and number of cycles. So, we were very pleased when the cells met all those conditions and that just unlocked the $10 million investment that was committed to a year ago. But, now that's fully funded. So the way only further cash coming in from VW is going to be related to put in place this joint venture that we've talked about in the past, where they've committed an undisclosed sum, to fund a 50% share of the first production plants that we're doing in this JV.
Ben Kallo
Got it. Thank you very much for the transparency. Thank you.
Jagdeep Singh
Thanks, Ben. Appreciate the questions.
Operator
Your next question is from the line of Joseph Spak with RBC Capital Markets.
Joseph Spak
Thank you. Good afternoon. Jagdeep, clearly good news on the larger format four-layer cell test. I was just curious, though, like, was this one test? Or like, how many four-layer cell tests were done? And I guess related, like, I know these are still pre-production cells, but how difficult or what was the yield that sort of gets the larger cells for the tests there?
Jagdeep Singh
Yeah, thanks for the question, Joe. So yeah, this is definitely good news, because as you point out on the last earnings call, we reported four-layer cells, but because we didn't have the capacity, we made them in 30x30mm form factors, which is somewhat smaller than this 70x85mm commercially relevant form factor kind of the playing card size. So the question was, okay, great, we can make them work in 30x30 form factor. What happens when we scale up to the full playing card size form factor? Will they still work? Or will new problems creep in? And so, what we reported on this, the data you see in the slide, and in the Shareholder Letter, is in fact that when we made them in multi-layer cells, this is more than one cell, we always make cells in batches, and put them on tests in batches. And obviously, the yield is not 100%. And when you make the cells, there's some cells that don't make it out of the manufacturing process. But, of the ones that we deem to be good cells, we see very good performance in terms of cycle life and capacity retention. So on the slide here, you're seeing that it's hard to read, because you don't have a background good on the slide, but that you see that the cells are approaching 500 cycles now, with I think, around 90% capacity retention, which means if they continue on in this fashion, you expect over 1,000s cycles, almost 80% in the full 70x85mm size four-layer cells. So, that's definitely new news and it's good news, because it means that when you -- what we showed last time is when you stack four-layers up together, you don't adversely impact cycle life. And now what we're showing is when you increase the area of those four-layers, you don't impact the cycle life or capacity retention. And those are the key questions that we had was, are there strange interaction effects, is that the larger area, does that create a bigger opportunity for problems to creep in and so on. And what this data shows is that it is in fact possible to make these four-layer cells and have them perform really well relative to cycle life and capacity retention. And, again, all of these test are being done at aggressive rates of power. So one hour charge and one hour discharge, battery cycle life testing is not done at those rates. It could be done at C/3, three hour charge and discharge. This is more like, again, what I will talk means you're discharging the full multi 100 mile range car in an hour. So that's 100 miles an hour in terms of driving, and then you also recharging it at a supercharger, and then now as opposed to in your garage overnight. And then these tests were done actually 25 degrees Celsius, which is basically room temperature, which, again, is something that isn't typically seen in solid state systems. So, we're actually very pleased with the performance that we're seeing here. But again, we're very careful always to emphasize that, whenever we hit a milestone, that it's a milestone, there's more work to be done, we got to get to the eight to 10-layer, so that was the question that a lot asked me, you have to continue increasing people and uniformity in Europe, and so on. So there's a lot of lifting to be done. But nonetheless, we're very pleased that we have four-layer, four or five cells working this early in the year, because that gives us confidence that we can really reach out to hitting the eight to 10-layers by year-end. And if we hit that goal, that will give us some of your increased confidence that we can make a multi-layer, full commercially relevant form factor prototype, to deliver to our OEMs to test in 2022. And at that point, the risk drops more and then we want to talk you about this, I will say that the they are keys and milestones. In 2023, we will have a higher volume of cells and the 200,000 cells a year, yielding off of our QS-0 pre-pilot line, that will be yet another important risk reduction step, because that's the player, those cells are going to heal cars on test tracks. So, these three or four milestones, the four-layer full size cell, the eight to 10-layer full size cell by year-end, the multi dozen layer full size cell perhaps in 2022. And then the hundreds of thousands full sized dozens of layers worth of cells, in '23 that will go into real cars. Every one of those handful of milestones represents sort of a step function drop in risk, that we feel is really make the story that much more exciting. So we're careful to communicate both the results here, and also the upcoming milestones. But every time we hit one of these milestones as we have today, I think we feel increasing confident that we remain on track towards our long-term goals. And, and that's really all we can do is focus on execution. We believe that if we can execute the -- the value proposition are so compelling, and the customer interest is so strong, that we're going to end up really making a significant impact on the industry.
Operator
And there are no further questions at this time. Do you have any closing remarks?
Jagdeep Singh
I just want to thank everybody for making time to join us today. I think that as you've heard on the call and our Shareholder Letter, we're pleased with the results that we've hit so far in terms of the four-layer cell that I just spoke about, the yield pressure cell, the customer interest that we continue to see, the momentum that we have at our manufacturing line. We've secured the QS-0 facility that will start to be turned up later on this year. And, again, we're going to keep focusing on execution. And we believe that if we keep executing, that we will achieve our goals of making an impact in this industry, or helping to make a dent on emissions, and of course creating a lot of value for our investors. With that, I want to thank you all for joining, and we'll talk to you next quarter.
Operator
That does conclude today's conference. Thank you for participating. You may now disconnect.