Good day, and welcome to QuantumScape's First Quarter 2021 Earnings Conference Call. John Sager, QuantumScape's Head of Investor Relations, you may begin your conference.
Thank you, operator. Good afternoon and thank you to everyone for joining QuantumScape's Q1 2021 earnings conference call. To supplement today's discussion, please go to our IR website at ir.quantumscapes.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 statements for the reasons that we cite in our Form 10 ks 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 Hetrick. 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 Jaydeep Singh.
Thanks, John. Welcome to our earnings call for the 1st 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 BW milestone, which required that we deliver to BW for testing in their labs in Germany, sales of a specific form factor and performance level.
The form factor consisted of near production intense secular 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 industrialization and also unlocked an additional $100,000,000 investment from BW. On the technical front, we are pleased to report that the team has made 4 layer cells in the larger 70x85 millimeter form factor that we laid out as a target on our last earnings 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 and intention and with the cells continuing to cycle. These results from 4 layer commercially relevant area cells indicate we are on track to meet our 8 to 10 layer cell milestone by year end, followed by prototype samples in the commercially relevant form factor containing dozens of layers by 2022. We also report today data from testing of ourselves with 0 externally applied pressure.
In other words, 1 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 in the cycle. However, delivering very high pressures as some solid state systems require adds cost and complexity to the system. As the data in our shareholder letter shows, the sales achieved over 1,000 cycles with good capacity intention even with 0 apply pressure. We did this work in corn sized cells, which is a platform we use for early research developments And while there is 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 towards introducing this capability into larger cells.
We believe that being able to manufacture cells that require 0 applied pressure could enable us to address markets beyond automotive, such as consumer electronics, where applying pressure was impractical due to size constraints and while not necessarily for automotive applications, to 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 QX0 pre pilot line as well as other R and D activities. We plan to move into this new facility in the Q4 of this year. Finally, we raised $478,000,000 in gross proceeds in a follow on offer in the quarter, of which approximately half will be used to fund the expansion of QS0 to over $200,000 per year. Additional capital from the equity offering will be applied to fund the build out of QS-one, our joint venture with BW, which will target commercial production in the 2024 to 2025 timeframe.
We've now encompassed 2 of the 4 previously announced milestones for 2021, the VW milestone and securing a facility for QOCIRA and have made strong progress towards the 3rd, 4 layer multilayer cells in the commercially relevant form factor. Our remaining stated biopsies for the year are to complete the development and testing of the 4 layer commercial relevant array of cells and then to build 8 to 10 layer full size battery cells. A few words of historical context. Swartz, Tim and I started the company over 10 years ago with the 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 electrify power cranes, 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 to weather the ups and downs of the development process. It ended up taking us 10 years with deep experimentation of every material we could think of to develop our solid state separator and the associated scale of manufacturing processes. This single-minded focus has served us well in the past and going forward, we intend to continue being extremely focused on executing to our development plans. We believe if we can do this, we will achieve our goal of delivering the next generation of value to our customers, positively impacting emissions and creating significant value for our investors.
Based on the groundbreaking results we have 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 clients' new holdings at least until we have delivered a prototype and a commercially relevant port package to Volkswagen. In closing, I'd like thank all of our employees for the incredible groundbreaking work they've been doing and whose commitment to our mission and vision has gotten us to where we are today. With that, I hand it over to our CFO, Kevin Hetrick, to say a few words about our financial performance and open it up for Q and A. Kevin?
Thank you, Jackie. In the Q1, our operating expenses were $45,000,000 Excluding stock based compensation, operating expenses were $33,000,000 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 $130,000,000 to $160,000,000 In terms of CapEx, on a full year basis, we expect to spend between $130,000,000 $160,000,000 with about half of that spend dedicated to our 200,000 plus QX0 cell capacity as well as tooling and machinery associated with an additional engineering line at our new building. The aforementioned capacity increase of QS0 enables us provide more prototype sales to VW, other automotive OEMs and prospective customers in other industries. We intend that QS0 will establish ensuring system blueprint.
Learnings from the larger QS0 capacity we expect to help further derisk our QS1 scale up. With respect to cash, we spent $35,000,000 on operations and CapEx in the Q1. We anticipate the aforementioned free cash flow burn be in the range of $260,000,000 to $320,000,000 for 2021. This is approximately $30,000,000 more than we communicated on our February earnings call, predominantly due to CapEx associated with the expansion of QS0 capacity. We ended the first quarter only $1,500,000,000 in liquidity.
We plan to end 2021 with well over $1,300,000,000 a net increase of over $300,000,000 compared to our liquidity position entering the year. We believe this capital fully funds QuantumScape through initial QS-one production and additionally contributes to the subsequent QS-one 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 Q1 was $75,000,000 Of this amount, dollars 31,000,000 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 0,100,000 shares. We ended the Q1 with approximately 389,800,000 shares of common stock outstanding, including approximately 12,000,000 shares from our March follow on equity offering and approximately 9,500,000 shares issued upon the exercise of assumed common stock warrants during the Q1. While the technical milestone associated with VW's investment was met in the first quarter 2021, the investment closed after quarter end following the expiration of the applicable regulatory waiting period. Consequently, the 15,200,000 shares subsequently issued to BW are not included in the aforementioned 389,800,000 shares common stock outstanding at quarter end.
Similarly, cash subsequently received from BW 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? Thanks, Kevin.
As we've done in the past, we'll now review a few of our most Ask questions from investors during the quarter before moving to the traditional Q and A session with the sell side analysts. Jagdeep, can you explain how you've tested for dendrites and what gives you confidence that your separator can resist dendrites?
Sure, John. So the best test for binderite resistance is actually the cycle lifetime. How long can you cycle under uncompromised test conditions, meaning high car densities and broad range of temperatures. For a single layer cell, we've shown over 1,000 cycles to over 80% capacity retention at high rates of power corresponding to 1 hour charge and discharge and a temperature of 30 degrees Celsius as opposed to elevated temperatures of 60, 70 or 80 degrees. Again, this is probably the best test to show resistance to the right foundation.
In addition to that test, we've done additional tests to determine the fundamental capability of our solid state material, such as the ladder 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 reported on our battery showcase showed the solid state separator could survive 100 milliamps per centimeter square, many times higher and what the seller could ever experience in a real work setting. These are some examples of the tests that have given us confidence that our material can effect You understand right in real world configurations.
Okay, great. Next, can you talk a little bit about the different types Testing in our presentations and why investors will see, for example, the ladder testing that you mentioned was done at 45 degrees Celsius versus our normal sort of cycle like testing which are done at 30 degrees Celsius and then there were also some tests done as low as negative 10 degrees Celsius to show the performance versus traditional lithium ion batteries?
Sure. So our standard test conditions, I would test our 70 millimeter to 85 millimeter area cells, which is the commercially relevant form factor at 30 degrees, which is near room temperature at 1C rate, which means 1 hour charge and 1 hour discharge, which actually is a relatively aggressive rate of charge and discharge, corresponds to discharging your entire battery pack, 100 of miles of range in an hour and supercharging it to recharge the battery pack in 1 hour. In addition to the standard set of data, we report additional data to fully characterized with forms of the cell. So we sometimes report data at Cthree, which is 3 hour charge and discharge rates, as well as higher and lower temperatures to reflect conditions that the cell might see in the real world. After the latter test, we used 45 degrees, as you mentioned, 45 degrees Celsius, and that's to reflect feedback from the automotive OEMs that we're working with.
The fast charge is most likely to occur when you're just coming on the highway and the battery pack is likely already self heated. The maintenance engine retest that we do is also very important to show how this cell performs in colder temperatures, results of key requirements for the automotive application. One that many solvency 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 cells perform in the real world.
That's incremental data beyond the base set that we provide.
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 first and making large numbers of sales on large scale manufacturing equipment before they've shown cycleized data that meets the automotive requirements of 800 cycles 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 step. So can you discuss these 2 different approaches?
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 3 main ones that are popular to use are polymers, worldwide and off-site. All three approaches have had issues, the most fundamental one being an inability to prevent dendrites.
A system that can't stop dead rights effectively will never be usable in a real car. Unfortunately, solving dead rights has turned out to be a really hard problem and many groups who are working in the space find it easier to try and solve the scale up and size of the cell problem and talk about at a faster scale of driving solve the fundamental issue of dynamic formation. Such approaches only end up working at elevated temperatures like 60, 70, 80 degrees or low latency power like C10 or C5, which makes it impractical for real automotive applications, about how big a cell will make or how much capacity it doesn't affect you. In our view, these approaches represent technological dead end. One material that's being used by a number of competitors that are talking about scaling up is the sulfide family of materials.
Unfortunately, besides the dendrite issue we just discussed, 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 to form HUS. And a quick Wikipedia search will tell you that HUS can kill at a few 100 parts per million. So it's a very serious issue that needs to get solved with 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 at high rates of power, I. E. 1 hour charge and 1 hour discharge without requiring temperatures elevated to 60, 70 or 80 degrees 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 scale.
I know some people say building a prototype is easy 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 are typically no material level inventions required to make a car, but manufacturing can be hard because it requires coordinating a bill of materials that might have 10,000 parts of it and ensuring a smoothly running supply chain that can deliver each of those parts on time is non trivial, even one missed part can cause the line to stop. But if we're talking about batteries on the other hand, I would say the chemistry is the really, really hard part. And as evidence, I point to how rare it is to see fundamental new chemistries over the last few decades that have entered commercial deployment. And in particular, I'd like to point to the 40 years of work that have gone into solid state materials with very little commercial success to show for all that work.
And by contrast, many companies in the battery space have shown they can build battery gigafactories in 18 to 24 months because there are no new law of physics required to build battery factories. For this reason, we chose to focus first on confirming that we had a material, our solid state separator, that could cycle under uncompromised test conditions without dendritic. And now that we've shown that, we've turned our focus to scaling up for layer count and production capacity of engineering manufacturing mines. We believe this is the only path to making a commercially viable in chemistry. So the chemistry works and then focus on scaling up the production factory, not the other way around.
Okay, great. Thanks for the thorough answer. Our last question goes to Kevin. Kevin, what's the total CapEx of QS0 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?
Hey, John, thanks for the question. What we have said is that CapEx spend on our new facility accounts for approximately half the $130,000,000 to $160,000,000 CapEx spend we estimate in 2021. We expect a similar magnitude of CapEx spend on the new facility in 2022. QS0 will be higher in terms of cost pre unit capacity than our subsequent QS1 facility. There are a few reasons for this.
The first, the one off engineering costs for QS0 tooling related to QuantumScape's locations are estimated to be a higher percent of total CapEx cost and also are not expected to be spread over as high a volume of purchases as for our QS-one facility. And second, the QS-one will feature larger scale tools that offer greater economies of scale. We believe the long term CapEx pre net revenue targets remain achievable. We have the benefit of eliminating anode related production equipment as our cells are anode free as manufactured. We plan to install in QS0, the same type of continuous flow equipment assumed in our long term forecast.
And the future work will be to hit our targets operating that equipment, for example, uptime, line speed, etcetera, to successfully achieve our long term cost targets.
All right. Great. Thanks, Kevin. We're now ready to begin the Q and A portion of today's call. Operator, please open the lines for questions.
Your first question is from the line of Adam Jonas.
Hey, everybody. So first, a question about Dell 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 0 external pressure, but the I just want to confirm that what is required and what is expected from the Volkswagen within the Volkswagen JV is that it would had external pressure. I'm curious how much that is and whether the amount of pressure matters in terms of form factor or cost.
Hey, Adam. Yes, it's Jadeep. So the sales that we delivered to VW were under the standard pressure that we've been recording ourselves at. And Basically, if you look at all of the data we published, we report the threshold 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 tax 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 extensive.
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 interesting first. So no one, Generally speaking, solace systems do require pressure to maintain interfacial resistance at good levels. And but the benefit of 0 pressure is that you can make the system applicable to applications where you just don't have the volume to the refresh.
So for example, in a consumer electronics application like mobile phone, there just isn't enough room to have any kind of pressure delivery mechanism. So the big benefit of with 0 pressure design. By 0 pressure, of course, I mean 0 externally applied pressure. There's still everything has one atmosphere of natural pressure on it. But the benefit of that approach It opens up applications like consumer electronics, which could be interesting applications for our technology.
And it does simplify the design on the module impact if you do it for automotive, although it's not required. And that's the key part we're making in our scripts in our
Thanks, Jagdeep. Just one 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 and 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, where you're 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.
Yes. I can let Kennen take on the 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. 1, of course, is The capital that we've already got from private investors and public investors, so that's already on the balance sheet. There's 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 been announced already they're funding half of the JV that we're doing for our initial deployment. Other OEMs find this technology to be equally significant. And so that's another source of capital is drawn in motor 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 through the U. S, but many parts of the world, recognize how fundamental A transformation of a very Board ministry 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 on a technological base. So obviously, Germany is one of the major manufacturers of cars We're 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 simply arriving at a similar conclusion. So with that as context, let me turn it over to Kevin. Maybe Kevin, you want to see a few words about specifically government level opportunities?
Sure. Adam, that's a fantastic question. Really just three things to add to J. Geep's comment. The first is that what you were noting is certainly the precedent for conventional lithium ion lithium ion factories.
So that if you look at any of the major recent factory announcements, they do tend to be paired with either at some level of country or state or city level support for all the right reasons that J. D. 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 QuantScape 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 to supply as well as in the rest of the supply chain as well.
Thanks very much.
Thanks, Adam.
Your next question is from the line of Gabe Daoud with Cowen.
Hey, afternoon guys. Thanks for all the prepared remarks and the Q and A. I guess I was curious if we could just go back to the 4 layer 70x85 test. I guess the pressure requirement, how is that relative to your expectations. And I guess once you start adding the layers here and getting to 8 to 10, how do you think that What climate will look like for a design of 8 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?
Yes. So our experience with them, 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 in the 1. And point in the 2 is, The reason why we released data on the zero pressure results is to indicate that in fact, we seem to be making great progress in an area where hasn't been a lot of progress historically, which is cycling lithium metal anodes without the need for any external new pipe 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 atmosphere is a design that can be engineered into automotive applications.
We think it's So a simpler design, did not require any 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 that will open up additional applications that do not have an opportunity for pressure like consumer
Thanks, Shajit. That's helpful. And then maybe just as a follow-up, Volkswagen on their power day had mentioned going the 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 pouch to prismatic to maybe a common VW or would the pouch design perhaps represent the additional 20% of demand from Volkswagen over time?
Yes. So I think the key point there is that when we say commercially relevant Sure, we mean a design that can in fact be engineered into a modular pack at the car level. 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.
Watt hours per year drops. So as we've mentioned on previous calls, we believe this 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 1000 watt hour per liter target that we have. And so with it ends up being commercially relevant to our OEMs and to the Volkswagen. You're right that there is a longer term desire on the part of not only VW, but many other OEMs to move to a quad packer that's somewhat wider than the jack of card And that's something that we will address in the future. But for now, our current form factor target for commercially relevant 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 the need to try to go to larger and larger port factories which then require additional development to commercialize.
Your next question is from the line of Rod Lachey with Wolfe Research.
Hi, everybody. First question, just a clarification. The zero pressure cell that you described, that does not have any liquid in it, Jagdeep? Yes.
So hey, Rod. Great question. I want to clarify, this is what Ravi asked this. When we talk about solidscape, what we're talking about is 2 things. 1 is that there's a solidscape 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 got a polyolefin material. Those materials don't conduct by themselves. Lithium ions can't move through on 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 was the cathode, the separator as well as the carbon particles in the anode.
So it's literally everywhere in the cell. Whereas in solid scape design, that's the one we're talking about, we eliminate the porous separator replacement with this pure dense run. There's no hole in it. And so the lithium ion test will move through the lattice of the 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 and a liquid, but that capital is limited that's the capital light, it's limited to the capital. And because we have the ceramic separator, that liquid doesn't actually make its way through the anode of the lithium metal. If it did, you would actually see the cycle life fade much more quickly than what you're seeing with ourselves. So in ourselves, we've shown, As you know, 1,000 cycles of cycle life with well north of 80%, in many cases 90% capacity retention significantly above the spec and that we don't believe will be possible if you use a liquid cell because liquids I'm going to react with metallic lithium.
This has been the whole problem with liquid based cells and lithium metal is that chemical side 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 And as a result, the cell cycle life starts to fade within 300, 400 cycles. It hits 80% and starts dropping off. So the key to a solid state cell is, A, a solid state that 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. Yes.
Okay. That's helpful. Thanks for clarifying that. You made a comment in the letter, Jagdeep, about the development tasks I had 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?
Well, so, yes, those are obviously key requirements for any high volume scale of process. And then we went through a similar process in our last company, which was Making optical photonics related semiconductor chip. And yield is one of those things that just continue to increase as well as you learn more about the process and how to get uniformity, how to have fewer defects, fewer contaminants in your lab and your metastatic floor, the yield 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 2 steps in the manufacturing process. Step 1 is to make what we call the green tape to cast the material. That's done on continuous 4 quarters. They are not so 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 2 is a continuous flow process where the firm just run through continuous flow heat treatment tool that ended processing those at the right with the right heat profile. So those are the kind of things that we're doing and that we need to 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 if we, for example, have QX0 produced 200,000 sellers a year like we're planning on, then that would be an indicator that all those metrics are in fact tracking to our
Yes, that makes sense. And just lastly, I was hoping you might be able to just pass along what 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?
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 so a couple of points. One is that, silicon is here today, so there's always lots of music. But I think there's of the people that we've spoken to, there's general agreement that lithium metal is the endgame. In fact, those are some of the words that we hear from OEMs directly, because you can't have a theoretically higher energy density or specific energy and the Imperial Lithium Metal in the sense that lithium metal doesn't have a hosted in any host material.
So all you have in a lithium ion is the same lithium cycling back and forth, assuming, of course, it's a 0 lithium cells. There's no excess lithium in there to help the nucleation of that lithium anode. So with 0 excess lithium, the only lithium in the anode is well that's cycling back and forth. There's no silicon, no carbon, nothing else to weigh you down or take up space. Now the second part about silicon is the reason why silicon is a little bit When people say silicon anode today, what they're really talking about is some amount of silicon that's actually put into a carbon anode.
So it's a carbon anode with some level of silicon in it. It's never 100% pure silicon. The reason for that is, as you I'm sure know, is pure silicon absorbs a lot of lithium and expands by a factor of 4, roughly speaking, and then contracts again when that's when the lithium goes out As the sun is discharged. So we've been charged and discharged. The lithium is already expanding and contracting like a sponge soaking up lithium and I'm sorry, silicon is expanding, starting the spun silicon of lithium and letting it go and over repeated number of cycling, that silicon polymerizes 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 analytically, how much silicon you have, which corresponds to energy density and your cycle life, which results from the total innovation of that silicon. When people say silicon, it's important to ask, how much silicon are you talking about? Because 100% silicon solution, to our knowledge, we've 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 on the silicon side will sometimes report data where it will show energy density of a silicon anode with a higher amount of silicon in it and then they'll show a cycloid slide with a lower amount of silicon nit. And it leaves the reader uncertain as to whether it's a same cell or not. It's important to kind of be able to ask those questions so we understand what's being said. So for the net of it is that, yes, the OEMs that we're talking to all looking at silicon as an immediate step towards the endgame of a pure metallic lithium nano, if that could be done. Obviously, we haven't yet shipped them pure lithium cells to put in their cars.
But if we do that, then we see we expect to see very strong interest in that from multiple OEMs as of course we continue to see certain analysts.
Great. Thanks, Sergey.
Thanks, Rod.
Your next question is from the line of Mark Delaney with Goldman Sachs.
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 is 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 BW?
Yes. I mean, 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 our batting shook us results in December, since we announced our Q1 earnings call with the multi year results, we've seen a continued increase in interest, both in terms of The level of interest and the amount of interest in terms of the number of players out there in our technology and our solution.
And to be candid right now, we really expect to be supply constrained in terms of both near term delivery of test sellers to these OEMs as well as the prototype samples that will come off of our QSEO pre pilot line. We did, as you know, decide to expand the Q1 pipeline more than double its capacity. That was a key part of the reason to do it all on operating quarter. But even with that added capacity, we expect that we'll be on our allocation, which is a good problem we have in some but it's still a problem in that we can't serve everybody's needs. The reality, 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 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 some of the safety benefits of the solid state separator and the cycle life that we're talking about, then why wouldn't it be attractive? So our key challenge really is delivering enough sales to all these players to try to give them up to read and we'll end up We'll be prioritizing the ones that we think will be the best fits for what we're doing.
That's helpful. Thanks. My second question was trying to better understand a comment in the shareholder letter. It talks about targeting commercial production in the 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 So maybe there's no change, but just trying to better understand the current freezing compared to what had been previously articulated on the financial plan. Thank you.
Yes, I think you pretty much articulated it well. If you look at the analyst presentation, the model that we have there, it showed relatively small revenue in 'twenty four, ramping up in 'twenty five, And that's what we're referring to, say, 'twenty four to 'twenty five timeframe.
Your next question is from the line of Ben Kallo with Baird.
Hey, thank you guys. You know, Jean, Deep, you do 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 in 18 to 24 months. And I was wondering just how the difference is in the form factor as you go From a cell to a battery and put that to 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 from taking all of those different form factor sales and making it into a pack.
But if you can just Maybe explain a little bit more to make it like for someone like you.
No, absolutely. A great question, Ben. So a couple of points. So a better context before I even answer the question. In terms of the factory So, 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 in 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, doesn't exist because there's no silicon, no carbon, Not even an extra layer of lithium on the anode, it's purely a 0 lithium anode that forms in situ in the first half. Should we keep the same capital line or we eliminate the anode line?
The only difference then is that when the conventional value buys separators from separator suppliers, we make our own separator. However, even there, we make that separator using tools that are scalable and continuous flow as I mentioned earlier. So, with the 2 step process in making that thicker, the 4 step is a casting process very similar to what's used for cathode coatings. So it's already obviously very scalable tools. The second step is the heat treatment step, but DAS2 is a continuous flow heat treatment to where things are running through this conveyor belt and being handled in It's a continuous flow fashion.
So they're both very scalable processes. Now the second part of the question is how is the battery or the battery pack process different from the cell process. So luckily so when we started the company, we actually thought we might We've since realized a couple of things. One is that making sales is hard. So we decided we wanted to focus on ourselves and not take on additional tasks beyond that like the pack.
But secondly, we also found that the OEMs we were talking 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 Canically, thermally, electrically via software. So they very much sell the package as a part of the car. The nice thing about making sales, however, sales have a very simple interface. A set of a 2 terminal device with not a lot of with not a lot of other complexity beyond it.
And so when we make sales, it's easy to hand off to the OEM. The OEM is the one to make tax. So really our only responsibility is at the design phase to make sure that we communicate the External behavior of the cell, that means its electrical interface, the thermal behavior, that hit the interface to the vehicle in terms of BMS and so on, but that's all we do. And the actual delivery Parts is a cell. So we just deliver cells to them and they have with an engineer the pack that can accept those cells and build a full pack with them.
I guess just to round that question out. So someone's already VW and then Your next OEM partner is already developing that pack, right, to match the cells and the next cell that you do that's bigger?
Yes. So actually the way it works is it's a collaboration. So the OEM tells us what their module impact looks like and what kind of cells would fit that module impact and we designed a cell that is designed to fit into that module impact with minimal changed. So in effect, this is why when people ask you, so how many layers are you sell? 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 cards. The reason why I say roughly is because the precise dimensions may vary by OEM in order to more clearly fit into their module impact.
Got it. That's very helpful. 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?
Yes. So the answer is that particular 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 And they were participating in the private round that we were doing at the time, and they had committed to invest $200,000,000 The first And this is, 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 had requested the idea of having a 2 tranche investment approach. Tranche 1 would be in December with no closing conditions, just simply a time delay to allow them to manage COVID impacts. In the 2nd 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 these separators in the right level of thickness to be commercially viable and achieve our energy density goals. And then on the test conditions, we just specified the specific test conditions relative to temperature and rate of power and number of cycles. And so we're very pleased when the sellers met all those conditions and that just unlocked the $100,000,000 investment that was committed to a year ago. But now that's fully funded. So the only further cash coming from VW is going to be related to putting in place this joint venture that we've talked about in the past, where we've committed undisclosed sum to fund of 50% share of the first production plants that we're doing in this JV.
Your next question is from the line of Joseph Spak with RBC Capital Markets.
Thank you. Good afternoon.
Clearly good news on the larger format 4 layer cell test. I was just curious though, like, was this one test or like how many 4 layer cell tests were done? And I guess related, like, I These are still preproduction sales, but how difficult or what was the yield to sort of get the larger sales for the customer?
Yes. Thanks for the question, Joe. So, yes, this is definitely good news because as you pointed out in your last on last earnings call, we reported 4 layer cells. That because we didn't have the capacity, we made them in 30 by 30 millimeter form factors, which is somewhat smaller than this 7 millimeter to 85 millimeter mostly relevant form factor, kind of the playing card size. So the question was, okay, great, we can make them work in 30 by 30 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 in the show letter is in fact that when we made them and marking their cells, This is more than one cell. We always make cells in batches and put them on test in batches. And obviously, the needle is not 100%.
So when we make the cells, there are some cells that Don't make it out of the manufacturing process, but of the ones that we deemed to be good sales, 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 we don't have a background grid on the slide, which you see that these sales are approaching 500 cycles now with, I think, around 90% capacity retention, which means if they continue on in this fashion, we expect over 1,000 cycles to 80% in the full 70 to 85 millimeter size 4 layer cells. So that's definitely new news and it's good news because it means that when you So what we showed last time is when you stack 4 layers up together, you don't adversely impact cycle ice. And now what we're showing is when we increase the area of those 4 layers, we don't impact the cycle life of capacity retention. And then those are the key questions that we had was, are there Strange interaction effects.
So, in fact, you have larger area. Does that create a big opportunity for problems to creep in and so on? And this data shows that it is in fact possible to make these for their cells and have them perform really well relative to cycle life and capacity retention. And again, all these tests are being done at aggressive rates of power. So 1 hour charge and 1 hour discharge.
Battery cycle testing is not done at those rates. They're typically done at C over T, so 3 hour charge and discharge. This is more like Again, 1 hour charge means you're discharging a full multi 100 mile range car in an hour, right? So that's 100 of miles an hour because of what you're And then you're also recharging it at a supercharger in an hour as opposed to in your garage overnight. And then you see these tests were done actually at 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 pretty we're actually very pleased with the performance that we're seeing here. 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, right? We got to get to the 8 to 10 layer cells. The question that Rod asked, we have to continue increasing throughput and you know, if you were born in the year and so on.
So there's a lot of lifting to be done. But nonetheless, we're very pleased that we have 4 layer, 4, 5 cells working this early in the year because that gives us confidence that we Ken ran a real shot at hitting the 8 to 10 year or so by year end. And if you hit that goal, then that would give us significantly increased confidence that we can make a multilayer, full commercially relevant form factor prototype to deliver to our OEMs to test in 2022. And at that point, the risk drops even more. And then while I'm talking about this, I would say that the other key In 2023, we'll have a higher volume of sales, 200,000 sales a year building off of our 2S03 to the pilot line, that will be yet another important risk reduction step because that's the point at which those guys will go into real cars on test racks.
So these 3 or 4 milestones, the 4 layer full size cell, the 8 to 10 layer full size cell by year end, the multi dozen layer full size cell And then the hundreds of thousands of full size dozens of layers worth of cells in 'twenty three that we're going to rear cars, every one of those handful of milestones represents sort of a step function, drop and risk that we feel 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 increasingly confident that we remain on track towards our long term goals. And that's really all we can do is focus on execution. We believe that if we can The value proposition is so compelling and the customer interest is so strong that we're going to end up really making a significant impact on the industry.
And there are no further questions at this time. Do you have any closing remarks?
I just want to thank everybody for making time to join us today. I think that as you heard On the call, it's not showing better. We're pleased with the results that we've hit so far in terms of the foreign aerosol that I just spoke about, the zero pressure cell, the customer interest that we continue to see, the momentum that we have with our manufacturing line, we've secured the 2.0 facility that will start to be turned off 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 maybe making an impact in this industry, 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.
That does conclude today's conference. Thank you for participating. You may now disconnect.