00:04:03 · CJ Gustafson, Kevin Hettrich
[00:04:03] S1: Two reflections. The first one is I've worked with so many PMs, Kevin, over the years, and they're always saying the PRD, the PRD. It literally just click now what PRD stands for. [00:04:12] S0: Having been a consultant during one of those chapters, I was trained to try to not use a lot of jargon, so thank thank you, McKinsey, for that training. I'm glad. I'm glad that I've I've given you that. [00:04:23] S1: I was today years old. Well, second thing just to reflect on, I've done over 300 of these interviews. I think you're the first CFO I've had on who's at the company before you could sell it.
00:04:23 · CJ Gustafson, Kevin Hettrich
[00:04:23] S1: I was today years old. Well, second thing just to reflect on, I've done over 300 of these interviews. I think you're the first CFO I've had on who's at the company before you could sell it. [00:04:33] S0: Some people consider better batteries one of the greatest unmet kinda science and engineering challenges on the planet, and we are doing something quite ambitious. Lithium ion is kinda the the workhorse chemistry that we use in the world to power our phones and cars, and that... Those were commercialized in the early eighties. Our company is at the point of the spear trying to bring the nest... The next chemistry to market, is called solid state lithium metal. We weren't even sure if the materials even existed that would allow us to develop these batteries. So truly a deep science, deep tech innovation company where our science and engineering teams are going to, like, the limits of what is kinda known in terms of human knowledge and, like, peering over the side and trying to push push it further. So it's a very, very ambitious company when we started. Individual battery markets can be measured in hundreds of billions of dollars, which is, like, EV and grid, and that's little bit of color and context on that. [00:05:33] S1: That's super helpful because I I mean, everybody listening uses batteries in some way, shape, or form, and we probably hear about it with all these cars going electric, even motorcycles going electric. I think I saw something like you were riding a Ducati across this stage.
00:05:33 · CJ Gustafson, Kevin Hettrich
[00:05:33] S1: That's super helpful because I I mean, everybody listening uses batteries in some way, shape, or form, and we probably hear about it with all these cars going electric, even motorcycles going electric. I think I saw something like you were riding a Ducati across this stage. [00:05:46] S0: About a year ago, together with our partners PowerCo, which is Volkswagen's wholly owned battery division, we made the solid state lithium metal cells, worked with Audi to make kind of a motorcycle pack out of them, and then put it into a modified v 21 l Ducati race bike and drove that across the stage at the Munich Auto Show. So that was our vehicle debut. We started the company fifteen plus years ago, not even sure if the material even existed. To go fast forward all the way to kinda late stage prototypes and powering our first vehicle on one of the preeminent automotive stages was pretty special. [00:06:27] S1: Can you just speak to having the patience for such a long feedback loop? I've never been a part of any company where it takes so long to find your commercial validation.
00:06:36 · Kevin Hettrich
[00:06:36] S0: I'll take that both as a compliment, and also, I too, we would like it to go as fast as we can. Two things, one is the size of this. Maybe a little bit of an anecdote of what we're trying to do and why it's so challenging. So batteries are very demanding things. They need to be small and light, they've gotta work with the power, the materials have to exist. The bill of materials, how you make them kinda has to work, and everything's all interconnected. It's a bit like having 10 or 12 key requirements and each one is an and statement. You miss one, you don't have it. So that's why they're so hard and why it's been such a kinda large kinda problem for a long time. We take lithium ion batteries, and we're taking all the graphite and silicon out of them. Turns out you don't need that. And when you do that, instead of lithium ions being the form it... It's... And when it charges, you plate out pure lithium metal. So having removed all that material, they're smaller and lighter. They're faster charging because it doesn't have to go the same distance. The the things we remove are... Tend to be flammable. And then one of the major sources of life loss is also linked to the things that we remove. So it's very elegant. You get all these performance advantages by removing graphite silicon. Graphite turns out 95% of which comes from China, and the elimination of that has some nice supply chain advantages, especially in some geopolitical futures where there's... Well, it doesn't have access to that. And that sounds great. Question is why haven't you done that? Because there's that little part in the middle of the battery between the two sides and the cathode. It needs to be engineered to make that work. It's a very thin ceramic material. Material has to be stable to lithium metal. Almost nothing is. In order to make that device work, we're passing one of the most reactive elements on the periodic table through it. So it's a solid film, you pass a metal through it. Imagine like you have like a windowpane or something. You put the lithium metal once that it literally like goes through it. It needs to do that reversibly like a thousand times. Less thickness than a human hair, and the build materials needs to be plentiful and need to basically manufacture it for free while doing the durable requirements of automotive.
00:08:43 · Kevin Hettrich, CJ Gustafson
So it's just wild, all these things stacked up. So that's why it's such a big prize. We have an amazing team of scientists and technicians and kind of the effective of pit crew that supports them all. It's because of the prize and it's because of the differentiated technology that there is that patience to put capital at risk because of the size of what is on the other side. [00:09:04] S1: You're allocating capital against these technical milestones where the probability of success... I mean I mean, it's hard to know. And then the end economics of when you finish it, that's still moving around because we function in this live economy. So as the CFO, what are you optimizing for?
00:09:04 · CJ Gustafson, Kevin Hettrich
[00:09:04] S1: You're allocating capital against these technical milestones where the probability of success... I mean I mean, it's hard to know. And then the end economics of when you finish it, that's still moving around because we function in this live economy. So as the CFO, what are you optimizing for? [00:09:18] S0: I'll give you a big picture answer and a small picture answer. Big picture. Is it a big market? Is the product compelling? And will it be when... If you kinda give credit to your competitors as well? If that's true, you're like, okay, I'm heading in the right direction. There's a big market. My customers are validating just how compelling it is. That's a good long term thing. From the short term nature, it's like, can I break this up into bites? A long term promise isn't very valuable if you don't exist to get it. So can I break up the value creation into steps? And do I have sufficient capital to kinda get to each one? And making sure that you're doing that conservatively and that the NPV kinda continues to solve at every point. One other thing I would highlight is that there's a lot of degrees of freedom. We have effectively every end market you can think of, and then there's a diversity of products and product requirements in there. So that that portfolio nature of this does give us lots of degrees of freedom, and perhaps we may talk about some of those choices along QuantumScape's journey.