Seoul, Apr 8 (IANS): South Korea will extend 7 trillion won ($5.31 billion) in financial support to domestic battery makers over the next five years to help them respond to the United States' Inflation Reduction Act (IRA) and to boost their competitiveness in the sector, the industry ministry said.

The government will extend the financing at lower rates and insurance premiums, among other things, to support battery firms' facility investment in North America.

The IRA calls for giving up to $7,500 in tax credits to EV buyers whose vehicles are assembled in North America, according to the Ministry of Trade, Industry and Energy, reports Yonhap news agency.

It also requires EV batteries to be made with a certain proportion of minerals mined or processed in the U.S. or countries or regions that have free trade agreements with Washington.

"As the IRA has caused global business circumstances in the battery sector to change fast, the government and the private sector need to work together for solutions. The government will fully support battery makers for their continued achievement in the global market," Industry Minister Lee Chang-yang said while presiding over a meeting with battery companies and institutions concerned.

South Korea also plans to push for new projects on the development of lithium iron phosphate batteries to help companies make inroads into a new market.

Greater tax incentives will be eyed for companies making an investment in battery materials and related fields.

In an effort to secure technology prowess, South Korea will seek to establish a "mother factory" or a hub of cutting-edge technology development, research, production and other core functions at home, according to the ministry.

The country's three major battery makers -- LG Energy Solution, Samsung SDI and SK On -- have pledged to make a fresh investment of 1.6 trillion won combined over the next five years.