The US government announced a decision Friday to extend tax credits for electric vehicles containing Chinese graphite until the end of 2026 -- an extension that followed a demand from EV manufacturers.

On the Federal Register, the Treasury Department posted the final rules on the clean energy vehicle provisions of the Inflation Reduction Act that included the temporary exemption of graphite from rules on the use of minerals from "foreign entities of concern," including from China, Russia, North Korea and Iran.

The IRA provides up to $7,500 in tax credits to buyers of EVs that met sourcing requirements and were assembled in North America. Automakers without tax benefits would find it difficult to compete against the beneficiaries of the credits.

The strict FEOC rules appear aimed at reshaping EV supply chains away from China amid an intensifying Sino-US rivalry, observers said. The rules have been expected to affect the South Korean EV industry that relies on China's supply chains.

Seoul's Industry Minister Ahn Duk-geun welcomed the decision, saying in a press release that his ministry's efforts to "reflect South Korean companies' position, including on the graphite issue, bore fruit."

South Korea had expressed concerns that it will be difficult to find an alternative supply chain for graphite within the given timeframe under the new IRA.

"The government has been actively communicating with the US to maximize benefits for South Korean companies since the enactment of the IRA in August 2022," the ministry said in the release. (Yonhap)