On Tuesday, the Department of Defense published the annual update of its Section 1260H list of Chinese dual-use industrial companies—essentially companies that the Pentagon believes are helping China’s military to modernize.

Included for the first time ever is the world’s largest supplier of EV battery cells, Contemporary Amperex Technology Co., Ltd. 

The Ningde-based manufacturer, whose shares dipped on the news, refuted the decision that sees it join other previous blacklisted entities such as telecom network equipment provider Huawei and semiconductor foundry SMIC, as well as all new ones like social media and gaming giant Tencent.

“CATL has never engaged in any military-related business or activities, so this designation by the Department of Defense is a mistake,” the company, worth the equivalent of $150 billion, said in a statement. 

By including CATL in the blacklist, not only is it barred from bidding for contracts with the U.S. armed forces, but partners like Tesla that source from it could be as well. 

Musk’s EV manufacturer could not be reached by Fortune for comment.

Trump cabinet pick Marco Rubio pushed for blacklisting

The move is controversial, since CATL supplies at least some cells to practically every major carmaker that sells electric vehicles in China.

Importantly, it is also a leader in the field of EV batteries featuring lithium iron phosphate (LFP) chemistry—a popular and affordable alternative to the higher-performance nickel manganese cobalt (NMC) cells more common in wealthy industrial nations.

The Pentagon did not explain its reasoning for including CATL, but it did say companies on the Section 1260H list could seek reconsideration of the decision by providing sufficient evidence to the government either for why the designation is no longer applicable or why it was never accurate to begin with. 

Notably, Trump’s designated Secretary of State, Senator Marco Rubio of Florida, urged the Biden administration in August to immediately add CATL to the list, citing the threat to national security.

“The DoD would not only safeguard America’s military infrastructure from exposure to the [Chinese army] PLA, it would also send a powerful signal to U.S. companies that are currently weighing partnerships with CATL,” Rubio wrote in a letter cosigned by Michigan congressman John Moolenaar, chair of the House select committee on the CCP.

Fortune reached out to the Department of Defense for further information but has not yet received a comment. 

How CATL emerged from obscurity to become a global EV battery leader

Founded only in 2011, CATL emerged out of nowhere to become the leading player in the global EV battery cell industry for the past seven years.

This stemmed in large part from a decade-old campaign by the Chinese Communist Party to promote EVs as an answer to its “airpocalypse,” the scourge of urban air pollution vividly brought to life by the 2015 landmark documentary Under the Dome.

Most Chinese megacities soon launched a crackdown on inner-city driving, including alternating days during which drivers could use their combustion-engine cars during days of intense smog. Restrictions were introduced that increased the cost of new license plates for gas-powered vehicles and greatly limited their allocation.

Exempted from this effort were “new energy vehicles,” which mainly included EVs and plug-in hybrids with sufficiently long electric-only ranges, leading to a boom for suppliers like CATL.

It also didn’t hurt that Beijing stipulated carmakers must source their cells from a list of approved domestic manufacturers if they wanted to operate locally. 

This protectionist requirement meant carmakers like Tesla with longstanding supply relationships with suppliers such as Panasonic had no choice but to enter into negotiations with CATL, Farasis, or Guoxuan.