South Korea will provide 9.7 trillion won ($7.1 billion) in financial aid for local electric-car battery makers to build a new supply chain that complies with US tax credit rules intended to reduce reliance on China. 

Korean authorities will also continue to seek to secure key battery materials so domestic manufacturers can maintain their competitiveness in the US by meeting requirements of the Inflation Reduction Act, the Ministry of Trade, Industry and Energy said Wednesday. The support came after the US last week gave carmakers a two-year reprieve in sourcing minerals, such as graphite, where China dominates the global supply chain. 

The financial aid will include tax credits and loans, the ministry said, without providing further details. 

South Korean battery makers, including LG Energy Solution Ltd. and Samsung SDI, have been racing to source graphite from outside China, which late last year tightened export controls on the material. Posco Future M. Co., which supplies General Motors Co., is preparing to import graphite from Africa, with former Chief Executive Officer Kim Jun-hyung describing it as “the most troubling part” in diversification. 

South Korea’s automakers and battery makers “welcome” the reprieve in the US rules, the ministry said. Officials will help companies have better communications with countries that have free trade agreements with the US — a key requirement to receive tax credits under the IRA — for securing critical battery minerals. 

They will also help companies meet new requirements in the rules, such as submitting plans on how to diversify graphite supplies from 2027 and make “accurate calculations” in the values of battery minerals to receive the benefits, it added.