Chinese electric vehicle maker NIO Inc. (NIO) is pushing back hard after the Trump administration labeled it a Chinese military company. On Tuesday, Nio released an official statement calling the decision "not justified" and threatening legal recourse if necessary.

"The Company will proactively engage with the U.S. Department of Defense to correct this inclusion on the CMC List," Nio said. The automaker also flatly denied having any ties to the Chinese military, stating it is "not a Chinese military company or a military-civil fusion contributor to the Chinese defense industrial base."

The designation comes from a Pentagon list of Chinese companies alleged to have links to China's military or defense-industrial sector. Alongside Nio, the list includes BYD Co. Ltd. (BYD), Baidu Inc. (Baidu), and Alibaba Group Holding Ltd. (Alibaba).

The timing is interesting. President Trump recently visited Beijing for a summit with China's President Xi Jinping, aimed at bolstering trade ties between the two nations. Trump was accompanied by several U.S. tech leaders, including NVIDIA Corp (NVIDIA) CEO Jensen Huang and Tesla CEO Elon Musk. The trip was seen as a step toward easing tensions, but this military designation suggests the relationship remains complicated.

Meanwhile, Chinese regulators have tightened restrictions on citizens investing in U.S.-based stocks, requiring all overseas stock purchases to go through approved channels. That adds another layer of complexity for Chinese companies listed in the U.S.

Despite the political headwinds, Nio's business is humming. The company reported May deliveries of over 37,705 vehicles, up 62.3% year-over-year from May 2025. Tesla Inc. (Tesla) also saw strong Chinese sales, with data from the China Passenger Car Association showing retail sales of over 47,821 units in May, a 22.6% YoY surge.

According to market data, Nio offers excellent momentum but fails to offer a favorable price trend in the short, medium, and long term. On Tuesday, NIO shares were up 3.17% to $5.53 in premarket trading.

For now, Nio is taking the fight to the Pentagon, hoping to clear its name. Investors will be watching closely to see if the designation sticks—and what it means for the company's U.S. operations and stock.