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It's been a monster week for QuantumScape (NYSE: QS). The stock, which was down 22% this year until July 10, is now up 15% year to date as of this writing thanks to a massive development that sent it skyrocketing on Thursday. Shares of the electric vehicle (EV) battery start-up were trading 57% higher for the week through 11 a.m. ET Friday.

QuantumScape's deal with Volkswagen is a huge milestone

QuantumScape is building solid-state lithium-metal batteries for EVs and is yet to start commercial production. Investors were spooked earlier this year when Reuters reported QuantumScape's key partner, Volkswagen Group (OTC: VWAGY) , was pursuing alternative battery manufacturers. QuantumScape just put to rest those concerns, and the stock's going parabolic.

This week, QuantumScape signed an agreement with Volkswagen's battery subsidiary, PowerCo, to license its battery technology for mass production upon satisfactory "technical progress and royalty payments."

Under the deal, PowerCo can manufacture cells up to 40 gigawatt-hours (GWh) annually on QuantumScape's technology with an option to expand up to 80 GWh, enough to power nearly 1 million EVs.

QuantumScape CEO Siva Sivaram said working with PowerCo as its first customer will help QuantumScape "accelerate commercialization and adoption of these game-changing batteries together."

To steer QuantumScape on this crucial journey, Frank Blome stepped down from the company's board of directors and will now lead PowerCo as its CEO as the two companies work on this collaboration.

Keep an eye on QuantumScape stock

Its agreement with PowerCo is a huge vote of confidence for QuantumScape as it confirms the viability of its battery technology and takes the company a step closer to the critical first production stage. Solid-state batteries are more energy-dense, charge faster, last longer, and are relatively safer than the traditional lithium-ion batteries that power most EVs today.

This week's milestone gave investors the perfect reason to bet big on QuantumScape stock, more so since it was languishing and had dropped nearly 45% in the past one year through July 10. The EV battery stock could continue to ride investors' enthusiasm, at least until its upcoming second-quarter earnings on July 24 after market close.

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Neha Chamaria 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.