Good day, welcome to QuantumScape's First Quarter 2021 Earnings Conference Call. John Saager, 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 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 statements for the reasons that we cite 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.
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 required 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 million investment from VW.
On the technical front, we are pleased to report that the team has made four-layer cells in the larger 70 by 85 millimeter form factor that we laid out as a target on our last earnings call. As the data in our shareholder letter shows, early results from the testing of these cells looks promising, approaching 500 cycles to date with excellent capacity retention and with the cells continuing to 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 in the 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 per 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 cells achieve over 1,000 cycles with good capacity retention, even with zero applied pressure. We did this work in coin-sized cells, which is a platform we use for early research developments, and while there is more work to be done to replicate these cells in larger area cells, achieving these results in this form factor is an important first step towards introducing the scalability 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.
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 activities. We plan to move into this new facility in the fourth quarter of this year. Finally, we raised $478 million in gross proceeds in a follow-on offering in the quarter, of which approximately half will be used to fund the expansion of QS-0 to over 200,000 cells per year. Additional capital from the equity offering will be applied to fund the build-out of QS-1, our joint venture with VW, which will target commercial production in the 2024 to 2025 timeframe.
We've now 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 multi-layer cells in the commercially relevant form factor. Our remaining stated milestones for the year are to complete the development and testing of the four-layer commercially relevant barrier cells, then to build 8 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 the vision of enabling the next generation of electric vehicles. We believed that if we could develop a solid-state battery, we could facilitate the transformation of the automotive industry from internal combustion engines to electrified powertrains, 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 through weathering 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 singularly 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 QuantumScape holdings, at least until we have delivered a prototype and a commercially relevant form factor to full volume. In closing, I'd like to thank all of our employees for the incredible groundbreaking work they've been doing, and this commitment to our mission and vision has gotten us to where we are today. With that, I'll hand it over to our CFO, Kevin Hettrich, to say a few words about our financial performance and open it up to Q&A. Kevin?
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+ 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. This 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 US 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 closed 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?
Thanks, Kevin. As we've done in the past, we'll now review a few of our most asked questions from investors during the quarter before moving to the traditional Q&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. The best test for dendrite resistance is actually the cycle life test. How long can you cycle under uncompromised test conditions? Meaning, high current densities and a broad range of temperatures. For our 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, at 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 dendrite formation.
In addition to that test, we've done additional tests to determine the fundamental capability of our solid-state material, such as a 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 squared, many times higher than what the cell could ever experience in a real-world setting. These are some examples of the tests that have given us confidence that our material can, in fact, resist dendrites in real-world configurations.
Okay, great. Can you talk a little bit about the different types of temperature 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 life testing, which are done at 30 degrees Celsius. There were also some tests done as low as negative 10 degrees Celsius to show the performance versus traditional lithium-ion batteries.
Sure. Our standard test conditions are we test our 70 by 85 millimeter area cells, which is the commercially relevant form factor, at 30 degrees, which is near room temperature, at 1 C 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 of hundreds of miles of range in one hour and supercharging it to recharge the battery pack in one hour. In addition to this standard set of data, we report additional data to more fully characterize the performance of the cell.
We sometimes report data at C over three, 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 ladder test, we use 45 degrees, as you mentioned, 45 degrees Celsius, and that's to reflect feedback from the automotive OEMs that we're working with, that fast charge is most likely to occur when you're just coming off of a 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 the cell performs in colder temperatures, which is also a key requirement for the automotive application. It's known that many solid-state systems actually can't run well at these cold temperatures. That data is an important indication of real-world applicability. 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 collect.
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 cycle life data that meets the automotive requirements of 800 cycles at 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 plan. Can you discuss these two different approaches?
Sure, John, let me back up a step. There are only a few basic materials that exist relative to making solid-state materials. The three main ones that are popularly used are polymers, sulfides, and oxides. All three approaches have had issues, the most fundamental one being an inability to prevent dendrites. Now, a system that can't stop dendrites effectively will never be usable in a real car. Unfortunately, solving dendrites 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 manufacturing scale-up rather than solve the fundamental issue of dendrite formation.
Such approaches only end up working at elevated temperatures, like 60, 70 or 80 degrees, or low rates of power, like C over 10 or C over five, which makes it impractical for real automotive applications, no matter how big a cell they make or how much capacity they build in their factories. In our view, these approaches represent technological dead-end. One material in particular 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, the sulfides have an additional serious issue, which is hydrogen sulfide formation. Hydrogen sulfide, or H2S, is an extremely toxic gas that forms upon contact of sulfides with ordinary air, which contains water in it.
A quick Wikipedia search will tell you that H2S can kill at a few hundred parts per million. It's a very serious issue that needs to get solved with the sulfide-based approaches. QuantumScape, by contrast, chose to first make a system that could be shown to meet the basic requirements of cycle life at high rates of power, i.e., one-hour charge and one-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. 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. 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. Manufacturing can be hard because it requires coordinating a bill of materials that might have 10,000 parts in 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. If we're talking about batteries, on the other hand, I would say the chemistry is the really, really hard part. As evidence, I point to how rare it is to see fundamentally new chemistries over the last few decades that have entered commercial deployment. In particular, I 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.
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 laws 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 dendrite. Now that we've shown that, we've turned our focus to scaling up the layer count and production capacity of engineering and manufacturing lines. We believe this is the only path to making a commercially viable new chemistry. First show that 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 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?
Hey, John. Thanks for the question. What we have said is that CapEx spend on our new facility accounts for approximately half the $130 million to $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, the one-off engineering costs for QS-0 tooling related to QuantumScape specifications are estimated to be a higher % of total CapEx costs, and also are not expected to be spread over as high a volume of purchases as for our QS-1 facility.
Second, the QS-1 will feature larger scale tools that offer greater economies of scale. We believe the long-term CapEx per unit 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 QS-0 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, et cetera, to successfully achieve our long-term cost targets.
All right, great. Thanks, Kevin. We're now ready to begin the Q&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. 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 within the Volkswagen JV is that it would have external pressure, and I'm curious how much that is and whether the amount of pressure matters in terms of form factor or cost.
Hey, Adam. Yeah, Jagdeep. The cells that we delivered to VW were under the standard pressure that we've been recording our cells at. 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 modest amounts of pressure is not an issue because those cells go into modules, and modules go into packs. You can engineer systems 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. 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. The benefit of zero pressure is that you can make the system applicable to applications where you just don't have the volume to deliver pressure. 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.
The big benefit of a zero pressure design, by zero pressure, of course, I mean zero externally applied pressure. Everything has one atmosphere of natural pressure on it. The benefit of that approach is that it opens up applications like consumer products, which could be interesting applications for our technology. It does simplify the design of the module and pack if you do it for automotive, although it's not required. That's the key point we were making in our script and our memo.
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 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?
Yeah. I can let Kevin 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. One, 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 through 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. Obviously, the VW JV is a great example of that, where they've obviously announced already they're funding half of the JV that we're doing for our initial deployment. Other OEMs find the technology to be equally significant.
That's another source of capital is [inaudible] . The third source of capital is, in fact, government incentives both at the federal level and the regional level. This is not just true in the U.S., but many parts of the world recognize how fundamental a transformation of a very important industry we're in the middle of. 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. Germany is one of the major manufacturers of cars, they're particularly concerned about this. In general, in the EU, there's lots of countries like that. The U.S. under the current administration is since arriving at a similar conclusion. With that as context, let me turn it over to Kevin. Maybe Kevin, you want to say a few words about specifically government-level opportunities?
Sure. Adam, that's a fantastic question. Really just three things to add to Jagdeep's comment. First is that, what you were noting is certainly the precedent for conventional lithium-ion factories. 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. Second point I'd make is that we haven't assumed any of this in any of our historical projections.
If QuantumScape does indeed receive any type of subsidy or government support, that would be upside to any of our plans or projections. 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.
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&A. I guess just curious if we could just go back to the four-layer 70 by 85 test. I guess the pressure requirement, how is that relative to your expectations? 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 to 8 could trend down throughout the rest of this year.
Yeah. Our experience has been, we currently apply, as you know, a single-digit number of atmospheres of pressure. When you apply pressure to a stack of cells, that pressure is distributed through the stack. 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. It's not the case that, for example, a 10-layer cell requires 10x the pressure. Well, that's point number one. Point number two is, the reason why we released the data on the zero pressure results, is to indicate that, in fact, it seems we're 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 external applied pressure.
The reason why we think that's interesting is because that does simplify the module and pack level design. Even though we believe single-digit atmospheres is a design that can be engineered into automotive applications, we think it's a simpler design, it 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. Also that will open up additional applications that do not have an opportunity for pressure like consumer electronics.
Thanks, Jagdeep. That's helpful. Maybe just as a follow-up, Volkswagen on their power day mentioned going the uniform cell route, prismatic approach. 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? Would the pouch design perhaps represent the additional 20% of demand from Volkswagen over time?
Yeah. 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 pack at the car level. The key there really is to have enough layers and enough energy density in a given form factor. 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., Wh/L drops. 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 1,000 Wh/L target that we have. With that it ends up being commercially relevant to OEMs and certainly 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 form factor that's somewhat wider than the deck of card size form factor that we've shown. That's something that we will address in the future. 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. There isn't the need to try to go to larger form factors, which then require additional development to commercialize.
Got it. Thanks, Jagdeep. Thanks, everyone.
Thanks, Gabe. Appreciate it.
Your next question is from the line of Rod Lache with Wolfe Research.
Hi, everybody. Just first question, just a clarification. The zero pressure cell that you described, that does not have any liquid in it, Jagdeep?
Yeah. Hey, Rod. Great question. I want to clarify, glad you asked this. When we talk about solid state, what we're talking about is two things. One is that there's a solid state separator. The separator is a dense material, unlike today's cells which have a porous separator made out of typically organic material like polypropylene, some kind of polyolefin material. Those materials don't conduct by themselves. The lithium ions can't move through those kinds of plastics. Instead, what they do is they have holes in them, and those holes are flooded with the liquid electrolyte. The liquid electrolyte floods the cathode, the separator, as well as the carbon particles in the anode. It's literally everywhere in the cell. Whereas in a solid state design like the one we're talking about, we eliminate the porous separator , replace it with this pure dense ceramic.
There's no holes in it. The lithium ion can actually move through the atomic lattice of the separator itself. Second point is between that solid separator and the pure metallic lithium, there is no liquid. 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. That catholyte is limited to the cathode. Because we have the ceramic separator, that liquid doesn't actually make its way to 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 our cells. 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.
That we don't believe would be possible if you use a liquid cell because liquids are known 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 the cell. As a result, the cell cycle life starts to fade within 300-400 cycles. It hits 80% and starts dropping off. The key to a solid state cell is A, a solid state separator 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.
Yeah. Okay. That's helpful. Thanks for clarifying that.
Sure.
You 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?
Those are obviously key requirements for any high volume scale of process. We went through a similar process in my last company, which was making optical photonically integrated semiconductor chips. Yield is one of those things that just continually increases, right? As you learn more about the process and how to get uniformity, how to have fewer defects, fewer contaminants in your lab, in your manufacturing floor, your yield starts to increase. Throughput is a function of the tools that you have and the processes that you have. 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. 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 flow coaters. They're not too different from what's done for today's cathode electrodes in battery factories. The second step is a heat treatment step. That step two is a continuous flow process where the films just run through a continuous flow heat treatment tool that ends up processing those with the right heat profile. 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 down to are we able to deliver the cells that we are planning on delivering to our customers?
If we could, for example, have QS-0 produce 200,000 cells per year like we're planning on, then that would be an indicator that all those metrics are in fact tracking to our goals.
Yeah. That makes sense. Just lastly, I was hoping you might be able to just pass along what you're hearing from other OEMs aside from Volkswagen on the development 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?
No, I mean, what we're hearing is exactly that. Clearly silicon is here today and has been here, frankly, for a while. One thing, so couple points. One is that silicon is here today, so there's always an option to use it. But I think there's, of the people that we've spoken to, there's general agreement that lithium 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 any host material. All you have in a lithium metal is the same lithium cycling back and forth, assuming of course, it's a zero lithium cell. There's no excess lithium in there to help the nucleation of that lithium anode.
With zero excess lithium, the only lithium in the anode is the one that's cycling back and forth. There's no silicon, no carbon, nothing else to weigh you down or take up space. The second point about silicon is, the reason why silicon is a little bit of a nebulous thing to get your arms around is because 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. 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 four, roughly speaking, and then contracts again when that lithium goes out as a cell is discharged.
Between charge and discharge, the silicon is literally expanding and contracting like a sponge, soaking up lithium and letting it go. Over repeated cycling, that silicon polymerizes itself, resulting in a loss of capacity. The only way to prevent that people have come up with, is to have a small amount of silicon in the carbon anode. There's a direct trade-off with silicon anodes between how much silicon you have, which corresponds to energy density, and your cycle life, which results from the polymerization of that silicon. When people say silicon, it's important to ask, well, how much silicon are you talking about? 100% silicon solution, to our knowledge, has never been shown to have any kind of decent cycle life.
This is unfortunately one of the things that is sometimes not reported in a way that's easy to understand. Some companies on the silicon side will sometimes report data where they'll 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. It leaves the reader uncertain as to whether it's the same cell or not.
It's important to be able to ask those questions so that you understand what's being said. The net of it 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. Obviously, we haven't yet shipped them pure lithium cells to put in their cars. If we do that, then we expect to see very strong interest in that from multiple OEMs as opposed to continued silicon anodes.
Great. Thanks, Jagdeep.
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? What it may take in order to win an additional customer beyond VW?
Yeah. Hey, Mark Delaney. Thanks for the question. We obviously can't comment on any deals that aren't announced. We have said that there's been a lot of interest from a lot of players. Since we announced our battery showcase results in December, since we announced our Q1 earnings call with the multi-year results, we've seen 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. To be candid, 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 QS-0 pre-pilot line. We did, as you know, decide to expand the QS-0 pre-pilot line, more than double its capacity.
That was a key part of the reason to do the follow-on offering last quarter. Even with that added capacity, we expect that we'll be on allocation, which is a good problem to have in some sense. It's still a problem in that we can't serve everybody's needs. The reality, Mark Delaney, is that 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. We're going to have to pick a small number of key partners anyway. In terms of the amount of interest we're seeing, I would say it's very broad, as you would expect.
If you have a technology that has the kind of features we're talking about, high energy density and the ability to charge more quickly, and some of the safety benefits of a solid-state separator, and the cycle life that we're talking about, then why wouldn't it be attractive? Our key challenge really is delivering enough cells to all these players to try to give them what they need and wind up really 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 GWh being shipped in 2024, and I think that was pretty early production. Maybe there's no change, but just trying to better understand the current phrasing compared to what had been previously articulated on the financial plan. Thank you.
Yeah, I think you pretty much articulated it well. If you look at the analyst presentation, the model that we had there showed relatively small revenue in 2024, ramping up in 2025, and that's what we're referring to when we say 2024-2025 timeframe.
Okay. Thank you.
Yeah.
Your next question is from the line of Ben Kallo with Baird.
Thank you, guys. Jagdeep, you do a very good job of explaining stuff that's very complicated to lay people like me. You said something about the cells and ramping up a battery factory in 18-24 months. 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. I expect it, or I would assume that you did due diligence with VW about that step in taking all of those different form factor cells and making into a pack. If you can just maybe explain a little bit more to make it.
Sure
meat potatoes for someone like me.
No, absolutely. A great question, Ben. A couple points. By way of 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 the lithium-ion conventional factory. For example, the cathode line will be virtually the same. It's going to be cathode coaters from the same types of suppliers. The cathode active material will be very similar to what's already used in today's, or the upcoming 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 bare lithium anode that forms in situ in the first charge. We 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 separators. However, even there, we make that separator using tools that are scalable and continuous flow, as I mentioned earlier. There's a two-step process in making that separator. The first step is a casting process very similar to what's used for the cathode coatings. It's already obviously very scalable tools. The second step is the heat treatment step. That too is a continuous flow heat treatment tool where things are running through this conveyor belt and being handled in a continuous flow fashion. They're both very scalable processes. The second part of the question is how is the battery or the battery pack process different from the cell process?
Luckily, 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. We decided we wanted to focus on cells, and not take on additional tasks beyond that, like the pack. 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. They very much saw the pack as a part of the car. The nice thing about making cells, however, cells have a very simple interface.
A cell is a two-terminal device with not a lot of other complexity beyond it. When we make cells, it's easy to hand off to the OEM. The OEM is the one who makes packs. 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 the interface to the vehicle in terms of BMS and so on. That's all we do. Actually, delivery of parts is just cells. We just deliver cells to them, and they will have engineered a pack that can accept those cells and build a full pack with them.
I guess, just to round that question out. Someone's already, VW, and then your next OEM partner is already developing that pack, right? To match the cells. The next cell that you do that's bigger-
Yeah. Actually, the way it works is it's a collaboration. The OEM tells us what their module and pack looks like and what kind of cells would fit that module and pack, and we design a cell that is designed to fit into that module and pack with minimal change. In effect, this is why when people ask us how many layers are on your cell, we say the actual layer count depends on the particular OEM, because every OEM has a slightly different, or in some cases, quite different module and pack architecture. We actually modify our cell design. 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.
Got it. That's very helpful. Congrats on raising the 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?
Yeah, no. The answer is, that particular milestone was set back roughly a year ago when we entered into our Series F agreement with them. This is before, obviously, we were a public company. We were still a private company, and they were participating in a private round that we were doing at the time. They had committed to invest $200 million. This, of course, COVID had already started, and the automotive OEMs have seen a significant drop-off in their revenues and cash flows. They had 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 impacts. The second tranche, they wanted to have that tied to what they thought was a really significant milestone on the path to commercialization.
That milestone, as we report in our shareholder letter, had to do with a specific form factor and specific test conditions. The form factor there was important because that specified near production thicknesses and areas for the separator itself. That gave 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. On the test conditions, they specified a specific test of conditions relevant for temperature and rate of power and number of cycles.
We were very pleased when the cells met all those conditions, and that just unlocked the $200 million investment that was committed to a year ago. Now that's fully funded. The only further cash coming in from VW is going to be related to putting 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.
Got it. Thank you very much for the transparency. Thank you.
Thanks, Ben. Appreciate the questions.
Next question is from the line of Joseph Spak with RBC Capital Markets.
Thank you. Good afternoon. Jagdeep, clearly good news on the larger format four-layer cell test. I was just curious, though, was this one test or how many four-layer cell tests were done? I guess related, I know these are still pre-production cells, but how difficult or what was the yield to sort of get the larger cells for the test there?
Thanks for the question, Joe. This is definitely good news because as you point out, on the last earnings call, we reported four-layer cells. Because we didn't have the capacity, we made them in 30 by 30 millimeter form factors, which is somewhat smaller than this 70-85 millimeter commercially relevant form factor, kind of the playing card size. 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? What we reported on the data you see in the slide in the shareholder letter is, in fact, that when we made them in multi-layer cells, and this is more than one cell.
We always make cells in batches and put them on tests in batches. Obviously, the yield's not 100%. When you make the cells, there's some cells that don't make it out of the manufacturing process. Of the ones that we deem to be good cells, we see very good performance in terms of cycle life and capacity retention. On the slide here, you're seeing that it's hard to read because we don't have a background grid on the slide, but you see that these 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 1,000 cycles to 80% in the full 70-85 millimeter size four-layer cells.
That's definitely new news, and it's good news because it means that what we showed last time is when you stack four layers up together, you don't adversely impact cycle life. 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. Those are the key questions that we had was, are there strange interaction effects. The fact that you have larger area, does that create a bigger opportunity for problems to creep in and so on? 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. Again, all these tests 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's typically done at C over 3, so three-hour charge and discharge. This is more like, again, one-hour charge means you're discharging a full multi-hundred-mile range car in an hour, right? That's hundreds of miles an hour in terms of what you're driving. You're also recharging it at a supercharger in an hour as opposed to in your garage overnight. 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. 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 eight to 10-layer cells.
The question that Rod asked, we have to continue increasing C current and uniformity and yield and so on. There's a lot of lifting to be done. Nonetheless, we're very pleased that we have four-layer full size cells working this early in the year, because that gives us confidence that we can have a real shot at hitting the eight to 10-layer cell by year-end. If we hit that goal, then that would give us significantly increased confidence that we can make a multi-layer, full commercially relevant form factor prototype, to deliver to our OEMs to test in 2022. At that point, the risk drops even more. While I'm talking about this, I will say that the other key benchmark is in 2023, we'll have a higher volume of cells, in the 200,000 cells a year building off of our QS-0 pre-pilot line.
That will be yet another important risk reduction step because that's the point at which those cells will go into real cars on test tracks. 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 by sometime in 2022, and then the hundreds of thousands of full-sized dozens of layers worth of cells in 2023 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 going to really make the story that much more exciting.
We're careful to communicate both the results here, and also the upcoming milestones. Every time we hit one of these milestones as we have today, I think we feel increasing confidence that we remain on track towards our long-term goals. That's when all we can do is just focus on execution. We believe that if we can execute, 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.
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 and I share with that, 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 zero pressure cell, the customer interest that we continue to see, the momentum that we have with our manufacturing line. We've secured the QS-0 facility that will start to be turned up later on this year. Again, we're going to keep focusing on execution, and we believe that if we keep executing, that we will achieve our goals of really 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.