Watch Out Tesla, Here Comes Volkswagen

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This story originally appeared on Fortune Magazine

Volkswagen AG has opened a new front in its campaign to close the gap on rivals Tesla Motors Inc.  and Nissan Motor Co. in the field of electric vehicles, buying a stake in battery developer QuantumScape Corp., according to Bloomberg News.

The news agency said VW, the world’s largest automaker, had bought a 5% stake in the company through its VW, with options to raise its stake, citing people familiar with the matter. Neither company confirmed the news to Bloomberg, and neither replied immediately to requests for comment by Fortune.

QuantumScape, based in San Jose and privately-owned, is aiming to develop a different kind of battery technology that Bloomberg said could triple the range of VW’s existing Electric Vehicles and offer better safety performance.

There are few publicly-available details about the company, whose website appears to consist of little more than a homepage. On LinkedIn, the company says it “seeks to change the paradigm in energy storage by developing a completely new class of electrical energy device.”

Bloomberg said QuantumScape is working on batteries that run on solid-state electrolytes rather than the liquid lithium-ion batteries that are currently standard in the industry (including VW’s existing models). Solid-state electrolytes may be less vulnerable to fire risk than liquid ones, it said. Viability tests are due to be completed by mid-2015, it said.

VW wants to use the technology in new products made by its flagship brands, VW, Audi and Porsche, none of which currently has a major presence in the U.S. market for EVs, by far the world’s biggest market for the new technology. According to research from the website insideevs.com, VW’s e-Golf accounted for only 120 of the 106,834 EVs sold this year in the U.S..

That compares with cumulative sales of over 27,000 for Nissan’s LEAF and 17,315 for Chevrolet’s Volt, the two biggest sellers in the sector. Tesla, which only provides worldwide sales data, has sold 13,800 Model S sedans this year.

VW’s group chief executive Martin Winterkorn has called electro-chemistry “a field where we can and must achieve progress,” and has hinted at past investments in battery technology companies, but the group has so far kept its cards close to its chest.

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