Good day, and welcome to QuantumScape's third quarter 2021 earnings conference call. John Saager, QuantumScape's Head of Investor Relations, you may begin your conference.
Thanks, operator. Good afternoon, and thank you to everyone for joining QuantumScape's third 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 the safe harbor provision for forward-looking statements that is posted on our website and as part of our quarterly update. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
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.
Thanks, John. Welcome to our earnings call for the third quarter of 2021. Earlier today, we published our shareholder letter summarizing the major developments in the last quarter. I'd like to briefly describe a few of the highlights here. On the Q2 2021 earnings call, we disclosed that we submitted our single-layer cells for testing by an independent third-party lab. We can now report that the results from these tests replicate the impressive performance we first disclosed in our battery showcase presentation in December last year. The lab carried out what we believe is the most automotive-relevant test over 800 cycles at 25 degrees Celsius, 1C, i.e., one hour charge and discharge rates, 100% depth of discharge, and 3.4 atmospheres of pressure. This test is critical because an automotive battery cell must simultaneously satisfy all these requirements.
Missing even one renders the cell inadequate for automotive applications. In other important news, in September, we announced an agreement with the second top ten global automotive OEM by sales revenue. This automotive OEM has already tested our cells in their labs, and the agreement calls for them to work with us to evaluate our batteries for inclusion into pre-series prototype vehicles and ultimately for series production vehicles. We've long held the belief that customer contracts are the ultimate external testing validation, so it's encouraging to have this agreement with the second automotive OEM as confirmation of the compelling value proposition offered by our technology. This OEM has committed to purchase 10 MWh of batteries from QS-0, our pre-pilot production line, contingent upon achieving technical milestones that are in line with our preexisting technical development roadmap.
As we said in the shareholder letter, although the potential near-term economic value of this agreement is in the dollar high single-digit millions, we believe this deal represents a major long-term opportunity. On the cell development front, we saw important developments during the past quarter. In August, we announced the completion of our third key milestone of the year, our four layer cells successfully demonstrating 800 cycles to more than 80% capacity at one hour charge and discharge rates at 25 degrees Celsius. Today, we report these cells have now achieved 1,000 cycles, well in excess of the commercially relevant target. Construction and development of 10 layer cells continues with encouraging results.
The first-generation 10-layer cells reported in the second quarter shareholder letter displayed energy retention behavior similar to our four and single-layer cells, as well as cycling performance in excess of our expectations for such early cells, achieving over 300 cycles at a 1C rate. As we've said before, achieving our targets requires continued improvement of the quality, consistency, and throughput of our processes. Our testing at aggressive 1C charge-discharge rates allows us to quickly identify potential refinements in cell design and construction, dramatically shorten the development cycle, and deploy improvements rapidly. Following the LFP data we shared last quarter, we continue to improve our high-energy-density LFP cells with refinements to the cathode material and manufacturing process.
We believe combining LFP cathodes with our lithium metal platform provides our OEM customers an opportunity to minimize active material costs and address their supply chain issues while addressing the fundamental challenge conventional LFP cells face, which is low energy density. For a deeper dive on LFP with lithium metal anodes, I'd encourage you to go to our website and check out our September ninth webinar on LFP batteries. From a manufacturing perspective, we wanted to lay out our scale-up plans, which call for a staged approach with several generations of manufacturing lines, which include an expanded engineering line, a pre-pilot production line, QS zero, and our joint venture production line with Volkswagen, QS one. Our engineering line is used for cell and process development as well as production of near-term customer prototypes.
An expansion to this line will allow us to increase cell output, providing the test cells needed to further accelerate our development program. We intend to use QS0 to both produce more cells for customer use in pre-series test vehicles and prove out the processes that will be used in our gigawatt scale QS1 production facility. This quarter, we finalized orders for large scale heat treatment tooling for the QS0 pre-pilot line in close collaboration with our vendors and partners. These tools represent the core of our manufacturing capability. Finally, I wanted to say a few words about our strategic vision, as while our immediate focus remains on achieving our near-term goals, these near-term goals should always be understood in the context of this broader vision.
Our board of directors recently laid out a series of ambitious targets for the company to be achieved over the course of the coming decade, including cumulative delivery of 1 terawatt-hour of battery cells, equivalent to the annual production of over 20 factories the size of the Gigafactory outside Reno, Nevada. Of course, we have a lot of work to do between now and then, but our ambitions will not stop there. We believe that the once in a generation shift to electric vehicles, combined with our transformative lithium metal battery technology, represents an extraordinary opportunity for decarbonization as well as shareholder value creation. Extraordinary opportunity demands extraordinary ambition. With that, I'll hand it over to our CFO, Kevin Hettrich, to say a few words on our financial performance before we open up to Q&A. Kevin?
Thank you, Jagdeep. In the third quarter, our operating expenses were $54 million. Excluding stock-based compensation, operating expenses were $41 million. This level of spend was in line with our expectations entering the quarter. For the full- year, we expect cash operating expenses, OpEx less depreciation and stock-based compensation, to be in the range of $130 million-$160 million, consistent with previous guidance. CapEx in the third quarter was approximately $39 million. For the full- year, we now expect CapEx to be in the range of $135 million-$165 million. On the Q2 earnings call, we discussed 2021 CapEx tracking higher than $130 million-$160 million, primarily due to the potential pull-in of some QS0 equipment spend from 2022 into 2021.
In Q3, our team secured shorter lead times for a portion of this equipment. We are consequently seeing less timing-based shift of QS-0 CapEx spend from 2022 into 2021. CapEx actuals are determined by lead times, order dates, and payment terms. Near year-end, changes in these factors can move lumpy payments either into or outside of the forecast period. We expect CapEx in 2022 to be significantly higher than 2021 as we continue to increase our engineering line capacity to support internal development and broader customer sampling, as well as to invest in our pre-pilot QS-0 line, consistent with our 2023 target of providing cells from that line for use in test cars. We'll provide more specifics regarding 2022 on our Q4 earnings call. With respect to cash, we spent $68 million on operations and CapEx in the third quarter.
We expect full- year 2021 free cash flow burn to be in the range of $260 million-$300 million. We continue to reiterate year-end liquidity guidance of greater than $1.3 billion. This quarter, our company achieved progress on cell development, manufacturing scale-up, and prospective customer engagement while maintaining a strong balance sheet. We ended the third quarter with more than $1.5 billion in liquidity. We believe exiting 2021 with more than $1.3 billion in expected liquidity provides sufficient capital to achieve our key milestones, including fully funding QuantumScape through initial QS1 production. Our GAAP net income for the quarter was $15 million, including the impact of $69 million in non-cash fair value adjustment of the assumed common stock warrants.
Excluding this non-cash adjustment, the net loss for the quarter was approximately $54 million, in line with our expectations. Lastly, this quarter, we completed the redemption of all assumed common stock warrants, an important step that further simplifies and streamlines our capital structure. Consequently, beginning in Q4 2021, we will no longer incur fair value adjustments related to these warrants. We're excited about the progress this quarter and look forward to the opportunities ahead. We'd like to thank our investors for supporting our mission to commercialize our solid-state lithium metal batteries and to help accelerate the mass market adoption of electric vehicles. With that, over to you, John. John?
Thanks, Kevin. We'll begin today's Q&A portion with a few questions we've received from investors over the Say app and in our IR inbox. Our first question is actually a combination of questions that came in through the inbox. We've recently seen some new data from two of your competitors, and it's hard to tell the difference between your results and theirs. Why do you think QuantumScape is ahead of them?
Yeah. The simple answer is we have not seen any other data from any other lithium metal or solid-state player that meets the basic requirements of the automotive sector, which of course, is to be able to cycle the 800 cycles at a 1C, i.e. one hour charge and one hour discharge rate at room temperature, i.e. 25 degrees Celsius, while retaining more than 80% of the cell's capacity. If you miss any one of these requirements, we don't believe that the battery is viable for automotive applications.
Now, neither of the players you mentioned have been able to demonstrate they meet these requirements. For example, both have shown cycling data at C/5 rates. That's a five-hour charge. In one case, which uses a liquid electrolyte with a lithium metal anode, this is likely because like previous attempts along these lines, their presentation slides show they're seeing dendrites, and lowering the charge rate is one way to reduce the incidence of such dendrites. In the other case, which uses a sulfide electrolyte with a carbon silicon anode, it could be because the cell internal impedance is too high to support high rate charge. Furthermore, any approach that requires a lithium metal foil to start with will face severe challenges from a cost standpoint, given the cost of lithium foil and the manufacturing complexities of handling reactive lithium metal in a manufacturing environment.
To summarize, to our knowledge, QuantumScape is the only next-gen battery player to have shown data that meets what we believe are the basic requirements of automotive application. Until a company shows data demonstrating their cells can meet these basic requirements, there might be other applications they can address, but we don't believe their approach is gonna work for automotive applications.
Okay, thanks. Our second question also comes from the IR inbox. Can you talk a little bit more about the significance of signing the second OEM? It seems like this is just an agreement for samples.
The significance of this is that this represents a second top 10 by revenue automotive OEM that has tested our cells in their labs and confirmed that they're interested in building pre-series and eventually series production vehicles if our technology continues to meet the milestones laid out in the agreement, milestones that are along our existing development timeline. The agreement is to take 10 megawatt hours of capacity from our QS Zero pre-production line, representing on the order of 100,000 cells, which is a really significant number that supports the idea of evaluating this technology for pre-series and eventually series production vehicles. We don't believe either side would have entered into this agreement if the intent wasn't to qualify this technology for use in production vehicles.
If we successfully deliver the milestones and get into series production, this OEM has the volume to drive significant revenues for QuantumScape.
Okay, onto questions from the Say app. Have you entered into any material agreements with manufacturers other than Volkswagen?
Yeah, John, I think we directly answered this question with our announcement of an agreement with a second top ten OEM this quarter, as we just discussed.
Okay, great. Do you have an estimated date on your first usable product for mass use, and what are the steps between now and then?
Yes. As we've said, our target is to start production in the 2024-2025 timeframe. In support of this, we're targeting having cells from our pre-production line, QS Zero, in 2023. Between now and then we need to do a few key things, continue increasing our layer counts, improving the quality, consistency, and throughput of our separator and cell manufacturing processes.
Are EVs the only use case for your batteries or are you planning on entering other markets?
John, our focus remains on electrifying the automotive powertrain, which we believe is the most significant market, both in terms of market opportunity and decarbonization potential. Having said that, given we're seeing strong interest from a range of other applications and we believe our technology could add value, in those sectors, but we would expect to also address those markets in the fullness of time.
Okay, thanks. Do you have a sufficient amount of lithium supply secured to meet future demands?
This is an interesting question because even though we use a lithium metal anode, we don't ever purchase any lithium metal. This is because in our anode free zero lithium design, 100% of the lithium in our anode comes from the cathode. Remember that conventional cathodes, such as NMC or LFP, ship pre-lithiated, and this is the same lithium that becomes our anode once our cells are charged up. There is no other excess lithium required. Note that this is not the case for all lithium metal approaches, as there are some that require a lithium foil to start, and we believe those approaches will have a serious cost challenge to overcome. Also, it turns out lithium is an earth abundant material.
In fact, our CTO once calculated that there's enough lithium in the earth's crust to ship 10^9 long range BEVs for 10^9 years. It's a lot of lithium. Now obviously, there's still a lot of work required to extract that lithium, but the fact that it's there means that if demand does go up, market mechanisms can encourage suppliers to extract more, something that wouldn't be possible if it weren't as earth abundant. Finally, our strong relationships with some of the world's top automotive OEMs provide us an opportunity to leverage their scale and purchasing power to ensure our material supply.
All right, thanks so much. We're now ready to begin the Q&A portion of today's call. Operator, please open the lines for questions.
Thank you, John. As a reminder, to ask a question, you will need to press star and then the number one on your telephone keypad. Again, just press star and then the number one on your telephone keypad. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gabe Daoud from Cowen. Please proceed with your question.
Hey, good afternoon, everyone. Thanks for the prepared remarks and for taking my question. Jagdeep, maybe could we start with just manufacturing and any comments you could provide on improvements to uniformity on the separator since your last update, and then maybe just remind us from a thickness standpoint, how big or how thick is the separator currently? Is it 20 micron and where do you have to get to?
Hey, Gabe, how are you? Thanks for the question. Let me answer the second part first on the thickness of the separator. You know, we've said publicly that our separator is in the tens of microns in terms of thickness. We've also said that the VW milestone that we had in Q1 that we reported on actually required that our cells be in a commercially relevant thickness with a separator and commercially relevant area. Of course, we all know we've met that milestone, so we feel like the separator is in fact you know before being made in those dimensions. Relative to manufacturing and the questions you asked about you know uniformity and consistency and throughput, those are exactly the things that we're working on.
I would say that, you know, one data point on those items is that when you look at our progress from one layer cells last year to four layer cells earlier this year to the 10 layer cells that we reported on, first in July and then again today, that progress wouldn't have been possible if we had not been making steady improvement on all three of those metrics. You need better quality of the film correlates with better performance in terms of everything from you know the current density you can handle to the cycle life to the reliability of the films. Uniformity and consistency relates to you know how many useful films you get out of a given number of films that you start.
Of course, throughput is the capability, the capacity of the tools that you have and how many films you can make. Of course, as we make higher layer count films, we need to get, you know, a lot more, capacity out. A 10-layer every single 10 layer cell needs 10 x as many films as a single-layer cell. It sounds obvious to say, but the reality is, if you think about what that means for a manufacturing line, you know, we need to have either tools that have 10x capacity or 10 x as many tools and operators and so on. The fact that we are now, you know, we've moved from making single-layer cells to four layer cells to 10 layer cells is indicative of progress on all three of those key metrics.
Thanks, Jagdeep. That's helpful. Maybe in follow-up on the manufacturing side, can you maybe refine a little bit or just better describe the quote, unquote, dozens of layers that we need to get to next year for your A samples as we're, you know, now in November getting close to next year? Is there anything that you can say to try to help us understand what that number could really look like?
Yeah, I mean, I think the actual layer count, as we've mentioned in the past, Gabe, is gonna vary by automotive OEM, because the layer count impacts, of course, the overall cell dimensions, the cell thickness, for example. That is gonna be a function of the OEM-specific module and pack design. We've said dozens of layers because that's, you know, they're all gonna be in that general range. I can also say, as I mentioned briefly, on the call and in more detail in the letter, you know, our manufacturing capability, you know, can be thought of as sort of three phases. Currently we're expanding our engineering line. That's the line in which we are doing all the R&D development.
The next phase of course will be QS0, which is the pre-pilot line that you know about already. The final phase will be the production line with Volkswagen, which we're calling QS1. We ordered a number of tools for both the engineering line and QS0, particularly the long lead time tools. As those tools continue to arrive and be commissioned and turned up, our capacity continues to increase.
The net of it is that, you know, we remain committed to the goals that we had outlined, you know, in previous quarters, which is that in 2022 we hope to have samples to our customers that are, you know, a few dozen layers in thickness in the commercially relevant form factor that we call those, you know, customer prototype samples. In 2023 samples that roll off the pre-pilot production line and those will be samples in enough quantity to basically assemble pre-series test vehicles to run test tracks. Those goals haven't changed.
Thanks, Jagdeep. Just one last one from me, just on commercialization. I know it's super early with this second OEM, but could you maybe just talk a little bit about what structure this could potentially look like over time, assuming they do become a customer upon commercialization? Would it be a JV similar to what you're doing with Volkswagen? And then finally, would QuantumScape represent the only solid state provider that this second OEM is working with? Thank you.
Yeah. Relative to the manufacturing model to supply this second OEM, it's a good question. The answer is that there are two possibilities and we haven't yet decided which one. Those two are either to have it be a you know a fully QuantumScape-owned facility where we you know are simply a supplier to this OEM. The other option of course is more of a VW-style joint venture where they're actually part owner in the manufacturing facility. We haven't yet made the final decision on what the parties are gonna prefer. Those are both viable options.
At the end of the day, you know, what I think they really care about is getting a sufficient quantity of high performance cells to meet their needs. Relative to whether we're the only other solid-state player, I wanna avoid, you know, addressing that directly, Gabe, because we haven't disclosed the identity of the OEM. I think that if we comment on the other partnerships, then I think that that starts to, you know, to narrow down the players.
More importantly, I think what we can say is that, you know, as you know, we don't believe we've seen any other solid-state or lithium metal effort that meets even what we consider to be the basic requirements, right? Can you cycle for 800 cycles at 25 degrees at a one hour charge and discharge rate? You know, we haven't seen that. I think we feel comfortable that, you know, that there's not a lot of, you know, viable competitive activity in this particular space.
Thanks, guys.
Thank you again.
Thank you. Your next question comes from the line of George Gianarikas from Baird. Please proceed with your question.
Hey, good afternoon, guys. Thanks for taking my questions. Maybe to start on the manufacturing side, you started to order parts and production tools. Can you talk about any additional learnings that you've had in that process that you could share with us, both positive and negative?
Yeah. I mean, tons of learnings. Not sure how much we can share, you know. The tools themselves, you know. I mean, a key part of what we're doing right now, you know, is of course, you know, sort of tuning and tweaking various parameters on the processes, on the various recipes, process conditions to, you know, find the ones that produce the best results. You know, we're doing a lot of that work. You know, we are working closely with our tool suppliers to specify the tools in a way that we think meets our needs. You know, in that process, there's a lot of learnings.
We've tried a lot of things that, candidly, we found, you know, didn't work as well as we thought, and other things that we found work, you know, better than we expected. That process will continue. You know, I think at the end of the day, it's never a completely straight line. You know, the real world, you know, is never a straight line anywhere. The key is that you make steady progress over time towards your goals. You know, I believe we're doing that, so we're happy with that progress right now.
Thank you.
The other thing I would add to that is that.
One more-
Sorry. Well, one quick thing to add to that, of course, is that, you know, part of the outcome of all this process development is we enhance our portfolio of trade secrets, right? So trade secrets are, remember, those innovations that we don't patent because they're not discoverable by, you know, our competitors. So you can't take apart the cell, examine it. You know, you can take apart a cell and examine it and determine things like the chemical composition of the materials and the physical architecture of the layout and so on. But you can't tell, you know, what recipe was used and which gases, which solvents at which temperatures, and for how long, you know, to get those outcomes. So those are the kind of things that we keep as trade secrets.
All this work we're doing on equipment evaluation continues to increase the trade secret portfolio, which we think is a good thing for our investors.
Thanks. One more just on the second OEM agreement that you've signed. Can you at least share, was it a bake-off? Were there other solid-state companies in the mix as far as you can tell? With regards to other testing that you're doing, are you aware of other companies in the OEMs that are also being tested? Anything you can share on the competitive environment would be appreciated.
Yeah, you know, if you're talking to a top ten automotive OEM, you can pretty much assume that these guys, you know, all these guys are exploring every possible battery option that they can because I would say you know effectively all of them are committed in one form or another to electrifying the powertrain. If you look at the volume that ends up driving in terms of battery needs, it's just enormous.
As a result of that, they are constantly looking not only to bolster their supply of current conventional lithium-ion batteries, which I'm sure you all you know about well in terms of all the current supply constraints in that space, but also next-generation batteries that can help them meet their product attractiveness goals, if you will. Our view has always been, as you know, that while it's great to see governments actively trying to encourage an EV industry for its decarbonization potential, at the end of the day, the product has to be attractive to the consumer.
Our belief has been that, you know, that until batteries get to be more competitive with the combustion engine, the product is going to be lagging combustion engine-based vehicles. We're seeing a lot of interest from a lot of these top OEMs around getting better batteries that can help narrow that gap with combustion engines and allow them to be competitive with, you know, traditional powertrains. I think you can assume that these guys have either looked at or evaluated every technology that they could get their hands on.
You know, they're entering into this agreement to us reflects you know a signal that the QuantumScape approach is in fact you know the most compelling and viable of the options they've looked at.
All right. Thanks, Carlos.
Sure. Thanks for the question.
Thank you. Your next question comes from the line of Evan Silverberg from Morgan Stanley. Please proceed with your question.
Hi, Evan Silverberg here on behalf of Adam Jonas. First question for you guys. I know QS zero is obviously more imminent in the future, but curious if you guys could give any color on QS one regarding site selection, location, start of construction. Initially, you guys had targeted a quarter of a gigawatt hour in 2024, so curious if you guys still think that's on time.
Yeah. Hi, Evan. We haven't said anything additional other than the press release in 8-K that we issued earlier in the year on the site selection process. I think the point you made is probably the key point, which is that you know, our focus in the near term is of course on QS zero, and we feel like if we can execute on QS zero, then we will acquire the learnings that we think are necessary to have a smooth turn up of QS one. We don't currently believe that you know, site selection is the gating item in turning up QS one.
We think it's really around making sure we get the full process details and sort of blueprints, if you will, for a scalable, you know, pre-pilot production line, which we can then replicate at QS-1.
Great. Thanks. One more. You know, you've shown the single layer, the four layer, and the 10 layers now in the 70 mm by 85 mm size. For the cells that you plan to deliver to OEMs in 2022, will they also be in that size, or will you need to scale up to a larger size for that?
Yeah, that's a good question too, Evan. You know, if you've noticed, we use the word commercially relevant in many of our communications with investors and the public in general. The reason for that is because the precise dimensions, again, for every OEM, are gonna be somewhat different because every OEM is gonna need our cell to be essentially an integral fraction of their module and pack dimensions. Not every vehicle has the exact same dimensions, and not every cell is gonna be exactly the same. However, it'll be in that same general zip code, if you will, of dimensions.
It might be slightly smaller in some dimensions, it might be slightly bigger, but it's not gonna be, you know, multiples of times smaller or bigger. That's why, you know, all the data we've been reporting this year, starting with the battery showcase last year, has been in the 70 by 85 form factor, 'cause we believe that is the commercially relevant size range for these cells. You know, roughly the size of a deck of cards. Whether it's slightly bigger or slightly smaller is gonna depend on the specific OEM, but it'll be in that general range.
Great. Thank you very much.
Sure.
Thank you. Your next question comes from the line of David Belle from Wolfe Research. Please proceed with your question.
Hi, everyone. David Belle on for Rod Lache. Thanks for the presentation, Jagdeep. I just wanted to go back to the earlier questions on manufacturing. With yield being such a critical parameter, could you describe to us what sort of levers you're actually pulling to improve the yield and improve the thickness?
Yeah. The three main areas that you know we continue to work on are the ones I mentioned earlier, right? One is film quality. Quality, you can you know what I mean when I say quality is that's the uniformity across a given film. If the film has you know compositional variance or morphological variance or any other variation across a given film, that would be you know lower quality than a film that's more uniform, that's higher quality. You know that's one key area. The second key area, of course, is consistency.
By that we mean, you know, hitting that high quality repeatedly, you know, actually every single time as we run the material through our process. What consistency translates to is really what you're calling yield. You know, if we can consistently make films of a given quality, then the yield will be higher. The final thing is throughput, which is, you know, again, how many films we can run through the process in a given amount of time. Now, those three things are actually not uncorrelated. It turns out that as we move to more scalable tools, for example, we've spoken about the fact that we're using these continuous flow tools to make our separator films.
Those continuous flow tools, as we get into larger tools, they require more automation, you know, because you have to be able to load and unload those films efficiently. Those more highly automated, larger continuous flow tools not only give you more throughput, but they also give you better consistency and quality because you have tighter control over the process, better metrology in terms of seeing what's happening with films as they're going through the process. We expect to see continued improvement on all three things because they're not really completely uncorrelated.
Okay. Thanks, Jagdeep. Just on the 10 layer cells, could you describe to us the sort of throughput you have, how many cells are you making on a weekly or monthly basis? And what is the, I guess, automated processes that you're able to use? Are they analogous in terms of output to what we would see in the QS-0 line? Furthermore, as you've gone from one to four to 10 layers, has the challenge of using the catholyte become more difficult or is it, has it been just as easy to do it with many layers as it is with 1?
Your first question had to do with the ten layers. We never disclose the actual, you know, number of, you know, films or cells that we make in any given period of time. You know, we are shifting our focus to making those ten-layer cells. Next year, as you know, we've talked about shipping multi dozens of layers in our cells. You know, we work on ways to do that. The keys to making that happen really are, one, we gotta get throughput up, so we get to have more films to work with.
Two is we gotta be able to, you know, continue to, you know, get good quality consistency. As we stack these films up, they continue to work well together. If you have, you know, 10 layers in a cell and there's one bad layer, then you have a bad cell. Consistency becomes important to produce more and more 10-layer cells, and we're working on that.
Relative to the electrolyte, like in the cathode, the catholyte, if you will, you know, the fact that we can make, you know, these ten-layer cells, and as you see from the charts in our letter, the fact that the performance is so similar, the cycling behavior is so similar to what we've shown before, is an indication that there's no fundamental change to the catholyte separator interaction in the multi-layer cell, compared to what you see in a single-layer cell.
Okay. Thank you, Jagdeep. Last one from me here. I just wanted to touch on this 1 TWh target, which is sounds really great, and it's super ambitious. I'd just like to hear from you know, what your impression is of the market over the next, you know, 10 years, and how do you expect to actually achieve this 1 TWh ?
I think it is an ambitious goal. I mean, as you said, it's the equivalent of, you know, what 20 gigafactories should produce in one year. I think where that goal comes from is the belief that if we truly believe that we have a technology that is capable of delivering higher energy density than conventional cells, maybe by 15% or more, that's capable of supporting faster charge times, that is safer in many ways because of the non-flammable separator. These are really critical selling points, and if we can get this into mass production, we're demand constrained. If we have the demand for it, then we should be able to build enough factories to really earn a meaningful share of the overall market for batteries.
Now, you know, we won't be in mass production until mid-decade, the 2025 timeframe or so. That doesn't give us a lot of time to ramp up to a cumulative terawatt hour. You know, it's not impossible. You know, it requires that we, you know, we turn up gigafactories that are of the size and scale of what's currently being planned by many of the leading battery manufacturers. You know, the original Panasonic gigafactory is, you know, probably on the order of 30 GWh-40 GWh . Many of the currently being planned battery facilities on the order of 100 GWh , you know, per year, right? Over five years, each of those factories is only capable of producing half a terawatt hour.
We don't think it's by any means impossible. It does require that we execute on getting this technology into mass production. It does require that we be able to you know execute on turning up production facilities. We believe the demand is there. We believe the fundamental technology has the capability to deliver on this. If we can continue our execution as we have been doing, we think we have a real shot at pulling it off. I think what that goal really represents is it's fundamentally a way to quantify you know what we've been talking about, which is we really wanna make an impact in two ways. One, of course, we wanna create value for our shareholders.
The second thing is we wanna play a role in the decarbonization of the transportation sector. We think both those goals are served well by having an aggressive ambitious target of the type that we just talked about.
Thank you, guys. Thanks for taking my questions.
Absolutely.
Thank you. There are no further questions at this time. I will now turn the call back to Jagdeep. Please go ahead.
Yeah. I wanna thank everyone for taking the time to join the call today. Obviously we're excited about the results that we shared. Independent third-party testing, you know, was one of the things we've been hearing about from our investors. We're delighted that the independent test data is extremely similar to the data we've shown in the past. Of course, the test was also run under what we consider to be, you know, aggressive driving conditions in 1-hour charge and discharge, 25 degrees Celsius, 100% depth of discharge, to 800 cycles to north of 80%. We're also pleased with our multi-layer results. Developments on the customer front remain positive as well.
We're gonna stay focused on these goals and tasks in the quarters coming, and we look forward to reporting on further progress on our next earnings call. Thank you all.
Thank you. Today's conference has been concluded. Thank you for participating. You may now disconnect.