The Tesla Motors Inc (NASDAQ:TSLA) Model S has the highest customer satisfaction rating of any car on the market and is still limited by supply, but according to Tesla Model S ex-chief engineer Robert Feldmaier that won’t be the main force behind future demand.

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“He sees EV demand as largely driven by regulations not consumers, and believes that based on current CAFE standards ~30% of vehicles will need some form of electrification long-term (~3% now),” writes UBS analyst Joe Dewhurst, who spoke with Feldmaier recently and points out that EU corporate average fuel efficiency (CAFÉ) standards will be revisited in 2017. If the standards become even more stringent down the line it could increase the demand for electrification beyond what Feldmaier has predicted.

Lithium ion batteries could be replaced with another tech

For people who want to increase their exposure to electric vehicles but think that Tesla Motors Inc (NASDAQ:TSLA) stock is overpriced, investing in chemical companies has been a common alternative. But Feldmaier warns that battery chemistry is still in flux. Lithium ion batteries lead the way right now, but lithium sulphur, lithium-air, and solid state batteries all have potential as well and a minor breakthrough could make any one of them the new standard. Feldmaier also says that he is less optimistic about fuel cells because a hydrogen recharging unit would cost a million dollars to build, while EV recharging units are in the thousands to build.

Tesla may need Gigafactory partners

But if that increases the long-term risks for chemical companies, Feldmaier also mentioned a potential catalyst for growth.

“Given Tesla’s limited battery component know how, he believes they are likely to work with partners in the medium term on its Gigafactory, creating opportunities for battery material producers,” writes Dewhurst.

There has been a lot of speculation about what impact the Gigafactory will have on Tesla Motors Inc (NASDAQ:TSLA)’s business (it sent the stock price soaring shortly after it was announced), but it will also be a boon for any company that Tesla brings in as partners. Dewhurst specifically recommends Umicore SA (EBR:UMI) (OTCMKTS:UMICF), Hitachi Chemical Co Ltd (TYO:4217) (OTCMKTS:HCHMY), Solvay SA (EBR:SOLB) (OTCMKTS:SVYZY), Asahi Kasei Corp (TYO:3407) (OTCMKTS:AHKSF), Arkema SA (EPA:AKE) (OTCMKTS:ARKAY), Ube Industries, Ltd. (TYO:4208) (FRA:UBE), and LG Chem Ltd (KRX:051910) (OTCMKTS:LGCLF).

But this also means that some of the more optimistic bulls may want to rethink their position. If a lot of your current valuation of Tesla Motors Inc (NASDAQ:TSLA) depends on it pushing battery technology forward and then selling battery cells to other companies, finding out that it has ‘limited know how’ makes that less likely.