(Bloomberg) -- The fate of Australian car plants run by General Motors and Toyota Motor Corp. hangs on the Sept. 7 election that pits a government committed to subsidies against an opposition vowing to scale back support.
GM's manufacturing unit in Australia, Holden, is waiting on the result before deciding on investments in the country beyond 2016, as Prime Minister Kevin Rudd styles the contest as a vote on the industry's future.
Rudd's government has set aside A$5.4 billion ($4.8 billion) for the domestic car industry until 2020 and pledged another A$700 million during the campaign. Facing a deteriorating budget position, opposition leader Tony Abbott, the opinion poll favorite, wants to cut A$500 million from the subsidies by 2015.
"What we aren't going to do is what Mr. Rudd has done over the last few weeks, and basically run down the road after Holden waving a blank check at them," Abbott said Aug. 21 in Brisbane. "It is possible to do sophisticated motor manufacturing in this country without a government handout."
The election will be "a referendum on whether or not we will keep making cars in Australia," Kim Carr, Rudd's industry minister, said in a statement the same day.
Cars made in Australia slumped to 13 percent of domestic sales in 2012 from 80 percent in 1984, according to data from Ford and the Federal Chamber of Automotive Industries.
The value of Australia's car exports in 2012 was 29 percent below the average of the previous 10 years, government data show.
Abbott's policy isn't "going to be enough to keep the manufacturers here long-term," said Tony Lemmo, chief executive officer of Autoteam Australia Consulting in Melbourne. "Our market, quite frankly, is not big enough for a manufacturing facility."
The local manufacturing operations of GM and Toyota had combined operating earnings of A$492 million over the five years to 2010, according to a 2012 report by researcher Ibisworld Inc.
Ford Motor Co., set to close its Australian car lines in 2016 after nine decades, said in May that the unit's costs are four times those of its Asia divisions and wouldn't be sustainable even with a doubling of aid.
"Automotive is a volume business," said Richard Reilly, CEO of the Federation of Automotive Products Manufacturers. "If you don't have the volume going through, then the economies of scale aren't there, and that makes it very difficult to continue as a business."