QS and 2 More Stocks to Watch in the EV Battery Space in 2026

Electric vehicles (EVs) are becoming a core part of global transportation. Improvements in battery technology are a major reason for that. Today’s EV batteries last longer, charge faster and cost less to produce than they did just a few years ago. As a result, the price gap between electric and gas-powered vehicles has narrowed, making EVs more appealing to a wider group of buyers.

While EV adoption may move at different speeds across regions, the long-term shift toward electrification remains intact. Per Fortune Business Insights, the global EV battery market size was valued at roughly $69 billion in 2024, with projections of $77 billion in 2025 to $115 billion in 2032, representing a CAGR of 6% during 2025-2032.

As more electric vehicles hit the road, demand for batteries is set to rise sharply. Batteries are the most critical component of an EV, directly influencing range, charging speed, performance and overall cost. In many ways, battery specifications define how competitive an EV can be.

Against this backdrop, battery-focused stocks deserve a closer look. Some companies are scaling production today, while others are betting on next-generation technologies that could reshape the EV market over the coming years.

A few stocks worth keeping an eye on are QuantumScape Corp. QS, Toyota Motor TM and Tesla TSLA. Each of these stocks carries a Zacks Rank #3 (Hold). You can view the full list of today’s Zacks Rank #1 (Strong Buy) stocks here. 

QuantumScape

QuantumScape is focused solely on developing solid-state lithium batteries for electric vehicles that promise higher energy density, faster charging and improved safety. While QuantumScape remains pre-revenue, progress over the past year has been notable.

In June 2025, the company announced a major manufacturing breakthrough with its new Cobra process. Compared with its earlier Raptor system, Cobra is roughly 25 times faster and far more compact, marking a critical step toward scalable production. That momentum continued in the third quarter with the start of B1 sample deliveries, allowing multiple automakers to begin evaluating QuantumScape’s cells.

The company also showcased its technology at the IAA Mobility Show in Munich, where a Ducati V21L motorcycle powered by QuantumScape’s QSE-5 solid-state cells was unveiled in partnership with Volkswagen. Beyond Volkswagen, QuantumScape has signed two additional joint development agreements with global automakers and expanded partnerships with Corning and Murata to scale ceramic separator production. Importantly, the company reported $12.8 million in customer billings for the first time, signaling early commercial traction as it moves closer to broader adoption.

The Zacks Consensus Estimate for QS’ 2026 bottom line implies an improvement of 15.5% from the projected 2025 levels.

Toyota

Toyota is one of the world’s largest automakers, but it has lagged its peers in EVs. To close that gap, the company is investing heavily in battery manufacturing and next-generation technology. A key step came recently with the start of production at Toyota’s new battery plant in North Carolina. The massive 1,850-acre facility can produce up to 30 GWh annually at full capacity and will serve as Toyota’s main hub for lithium-ion battery development in the United States.

The site will house 14 production lines supporting hybrids, plug-in hybrids and battery electric vehicles. Initial output will power models such as the Camry HEV, Corolla Cross HEV, RAV4 HEV and a yet-to-be-announced all-electric three-row SUV. Additional lines are planned through 2030 as Toyota expands its EV lineup.

Beyond North Carolina, Toyota is strengthening its U.S. battery supply chain through a $1.5 billion purchase agreement with LG Energy Solution’s Lansing plant and a $50 million investment in a battery development lab in Michigan, scheduled to open in 2026. For the long term, Toyota is also pushing toward solid-state batteries, targeting its first solid-state EV around 2027-2028, with dramatic gains in range and charging speed.

The Zacks Consensus Estimate for TM’s EPS in the next fiscal year indicates an uptick of 20% year over year.

Tesla

EV giant Tesla also remains a key stock to watch due to its deep involvement in battery design, production and integration. Its in-house 4680 lithium-ion battery program is central to Tesla’s long-term goal of lowering costs, simplifying vehicle architecture and reducing reliance on external suppliers.

Tesla has spent several years working to scale 4680 production. In April, the company disclosed that it had produced 100 million 4680 cells as of last September and claimed its in-house cells are now more cost-effective than externally sourced alternatives.

At the same time, recent supply-chain adjustments highlight ongoing execution challenges. A sharply reduced cathode materials agreement with South Korea’s L&F suggests Tesla is pacing its 4680 ramp more conservatively than originally planned. Rather than forcing scale, Tesla continues to balance limited in-house production with battery sourcing from partners such as CATL, Panasonic and LG Energy Solution.

The Zacks Consensus Estimate for TSLA’s 2026 EPS calls for an improvement of 42% from the projected 2025 levels.

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This article originally published on Zacks Investment Research (zacks.com).

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