A key partner for Elon Musk’s Tesla is threatening to sue the U.S. government over the Pentagon’s decision to blacklist it from federal contracts, blasting it a “mistake”.

The Department of Defense added Contemporary Amperex Technology Co., or CATL, to a list of "Chinese military companies." The company is fighting the designation.

The automaker has long faced pushback over its plan to license Chinese battery technology at its multibillion plant in Michigan.

Ford has a licensing agreement to manufacture electric vehicle batteries with technology from a Chinese company that's under scrutiny at the Pentagon.

Tencent’s shares plunged nearly 10 percent after it was designated a military company. The Chinese battery manufacturer CATL was also added to the list.

But spokesman Mark Truby noted that the Marshall site will be a Ford-owned plant with Ford employees. In the past, Ford has said that it believes licensing the technology from CATL and manufacturing the batteries in Michigan will support a strong U.S. manufacturing base and is preferable to importing batteries from China.

The addition of Contemporary Amperex Technology Co., Limited (CATL) to a Chinese military-linked entities list has thrust Tesla’s reliance on the Chinese battery giant into the spotlight. While the designation currently imposes no direct sanctions,

The Pentagon recently added Tesla’s battery suppliers, Contemporary Amperex Technology, and Tencent to its list of companies with ties to the Chinese military. While the designation has minimal direct business impact,