QuantumScape Stock Is Down on Recession Fears -- but Are They Justified?

Shares of electric vehicle (EV) battery start-up QuantumScape (NYSE: QS) were trading lower on Thursday, after new economic data stoked fears of a looming recession in the U.S.

As of 3 p.m. ET, QuantumScape's shares were down about 6.6% from Wednesday's closing price.

New data hints that a recession could be coming

Two new data points on Thursday increased Wall Street's worries about a potential recession .

First, initial jobless claims rose to 249,000 last week, higher than expected and the highest total in almost a year. On top of that, a key measure of U.S. manufacturing activity, the ISM manufacturing index, was down for the fourth straight month in July. While one down month could be a blip, four in a row suggests that activity in America's manufacturing sector is contracting.

Neither data point means a recession is certain. But both suggest that the U.S. economy could be slowing.

For EV start-ups like Rivian Automotive or Lucid Group , a recession could be very bad news. But while a U.S. recession wouldn't be good news for QuantumScape, it wouldn't necessarily put the company at grave risk.

Image source: Getty Images.

Why a recession might not hurt QuantumScape too badly

QuantumScape said last week that it will have enough cash to fund operations into 2028. Because it doesn't yet have meaningful sales, and won't until next year at the earliest, it won't worry about a recessionary slump in the near term.

What it might worry about is cuts or delays in EV spending at big automakers, including QuantumScape investor (and likely first customer) Volkswagen .

But while that's a risk, EVs are exactly the kind of thing an automaker like VW is likely to prioritize during a downturn -- and QuantumScape's long cash runway should see it through.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy .