Electric vehicle battery startup QuantumScape (NYSE:QS) stock is heading into the new year in fine style, up 25% for the year. QuantumScape is shipping prototype batteries to customers, with one customer surpassing design targets. Yet there are clouds around all those silver livings.

QuantumScape has sufficient funds for the next few years but will require additional cash infusions. And QuantumScape needs to prove it can operate at scale profitably. It’s why QS stock sits some 70% below the price it hit the market at three years ago and 95% below its all-time high. So let’s look at whether 2024 is the year when QuantumScape stock proves its promise.

A Closer Look at QS Stock

More often than not the financials of a startup look ugly until it finds its feet. QuantumScape is no different. Without a commercial product, it generates perpetual losses. Year to date, QuantumScape lost $331 million, 10% worse than during the year-ago period. 

QuantumScape has $1.1 billion in funds, spending $182.5 million in nine months at $20 million per month. It has about four years before it runs out of money. QuantumScape is in the pre-production stage. It’s not operating commercially and needs significant funding to reach that stage.

Analysts at HSBC (NYSE:HSBC) believe the QS won’t generate any meaningful revenue until 2027 at the earliest. It also won’t be cash flow positive until 2031.

Because the costs imposed by ramping up to commercialization will eat into its cash stash very quickly, the window before it needs to raise more narrows considerably.

Earlier this year, it sold $288 million in new stock, but to its credit, it doesn’t have any long-term debt. It has about $59 million in operating lease obligations, however. 

The HSBC analysts believe a cash-raise is just over the horizon.

They warn, “We see the potential for cash burn to increase materially as it scales based on what other battery makers have experienced, and are also concerned about future dilution risk as it looks likely that QuantumScape will need to raise capital by late-2025.”

An Evolution in the Making

There is still hope for QS stock, but many companies with promise fail. Investors need to exercise caution when investing here. 

The performance of QuantumScape’s prototype A0 battery cell is exceeding expectations. It reportedly achieves 1,000 full cycle equivalents with over 95% discharge energy retention. That’s well above its commercial target of 800 cycles with 80% energy retention.

If successful, QuantumScape’s solid-state batteries could achieve a range of 650 kilometers (about 400 miles) and allow charge times of just 15 minutes. That is the promise that revolutionizes the EV industry. 

It may be just what EVs need. Sales growth is slowing even as prices remain elevated. Despite price cutting by manufacturers and incentives, the average cost of an EV is over $52,000. That’s closer to the auto industry average of $48,000, but still out of the range of the average buyer.

Making a battery that allows the EV to match fossil fuel-powered vehicles distance and dramatically lower charge times could tilt the scales in their favor.

So QuantumScape has potential but it also carries a lot of risk. Investors would do well waiting to see if it can carry through on its promise before diving into too deep.

On the date of publication, Rich Duprey did not hold (either 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.