QuantumScape (NYSE:QS) stock was one of the laggards in 2022 as broader market trends forced shares into a retreat.

The stock experienced a steep decline of 76% in 2022, reaching its highest point during the first week of trading and gradually decreasing during a turbulent year. However, the year thus far has been brilliant for Quantumscape. Shares are up almost 38% in the year thus far, affirming the positive momentum.

Investors in the company have experienced a tumultuous time as QuantumScape strives to advance and market solid-state battery technology.

It is understandable why there is so much buzz surrounding QuantumScape’s technology. The company claims that its solid-state technology could significantly improve the performance and affordability of electric vehicles.

This tech would make it possible to manufacture a car with a range of over 300 miles and 15-minute charging time for less than $30,000. Furthermore, these batteries have the potential to be lighter and safer compared to the current liquid and gel lithium-ion batteries.

The technology hasn’t been implemented on a large scale yet, but might disrupt the current EV battery market.

The company has entered the initial stages of test manufacturing. However, full commercialization is still years away. This reality has become increasingly apparent to the investment community, resulting in a drop in the stock price.

Investors bullish on the company’s technology should keep a measured stake in this speculative play. It is advisable to exercise restraint and not go overboard with QS stock.

QuantumScape is still years away from full commercialization. So, there is plenty of opportunity to add to your position with this one.

Tough Path Ahead

QuantumScape faces a colossal challenge in commercializing its technology, which involves more than just building factories and manufacturing batteries. The company still needs to demonstrate that it can produce this innovative technology at a large scale and at low cost.

The company expects its first-generation batteries will have a usable lifespan of 240,000 miles. QuantumScape must substantiate its claims through rigorous real-world testing in collaboration with its automotive industry partners. Although the company has provided prototypes to original equipment manufacturers, it will take several years to achieve commercialization.

Also, QuantumScape must achieve all this in a difficult capital environment. A depressed stock price and rising interest rates imply that additional funding will be more expensive.

It currently has a sizable $1.06 billion in cash and equivalents as of December, which it can draw on for now but will eventually require additional funding.

Is it possible for QS to exceed its previous stock price highs? It is conceivable but highly unlikely in the near future, if at all. Moreover, there is a chance that the company may not achieve commercial success for its investors.

Ultimately, QuantumScape must address many challenges before mass production, including manufacturing costs, reliability, and safety. While solid-state battery technology holds the potential to revolutionize the automotive industry, it is still years away from widespread adoption.

Positive Update on Progress

With the slowing ferocity of interest rate hikes, the broader markets exhibit some optimism. However, QuantumScape gave investors plenty of reasons to rejoice recently. The recent increase in QS stock price is also attributable to these positive developments.

As per the management, in 2022, the company contracted with three additional automotive manufacturers, including a leading global automaker in revenue and a company exclusively focused on electric vehicles.

The company also sent its initial 24-layer prototype A0 lithium-metal battery cells to automotive Original Equipment Manufacturers for testing in December.

Moreover, QuantumScape has delineated its primary goals for 2023, which encompass augmenting cathode capacity loading, enhancing cell packaging efficiency to attain higher battery power rates, improving production quality and consistency, and introducing a new “disruptively faster and more scalable film production process.”

Despite the stock’s gains this year, investors with faith in its technology should continue holding a suitable proportion of this speculative stock in their portfolio. The work is groundbreaking. Therefore, QS stock holds the potential to be a multi-bagger. However, the size and timing of your investment will rest on your profile.

If you want more information on how to play the situation, check out David Moadel’s excellent article on the matter.

Meanwhile, if you are still undecided on QS stock, here is a great list of battery stocks to buy.

What Is the Future of QS Stock?

In conclusion, QuantumScape is a highly speculative investment with a promising future. The company’s solid-state battery technology holds enormous potential to revolutionize the electric vehicle industry, providing affordable, long-range EVs with fast charging times. However, the company is still in the early stages of commercialization and faces several challenges, including manufacturing costs, reliability, and safety.

Nevertheless, QuantumScape has made significant progress, including securing agreements with three more automotive manufacturers and sending its initial 24-layer prototype battery cells to clients. With a long-term horizon and allocation, investors who believe in the company’s potential technology can benefit from the positive momentum and future growth prospects of QuantumScape. However, it remains a risky investment.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.