LG Energy Solution (LGES), South Korea’s electric vehicle (EV) battery maker, has signed a preliminary agreement with China’s lithium producer Yahua Industrial Group to produce battery-grade lithium hydroxide in Morocco.

The partnership will help bolster the supply chains for core battery materials and meet the sourcing requirements in the US, state-owned Yonhap News Agency reported, citing a company statement.

No production and financial details were given.

The US Inflation Reduction Act (IRA) gives up to $7,500 tax credits to EV buyers for vehicles assembled in North America and made with equipment using minerals mined or processed in the US or countries having free trade agreements (FTA) with Washington.

The deal will help LGES prepare for the proposed Critical Raw Materials Act, a similar legislation on minerals supply chains pushed for by the European Union (EU).

Morocco has FTAs with the US and the EU, the statement said.

(Writing by P Deol; Editing by Anoop Menon)