Govt subsidies 'critical' to car industry THE car industry says it contributes billions of dollars to the Australian economy that would be lost if the foreign-owned automotive companies closed their factories. It's hoping new modelling from the Allen Consulting Group, commissioned by the Federal Chamber of Automotive Industries (FCAI), will add weight to the industry's pleas to government to maintain subsidies. The government has asked the Productivity Commission to review the car industry, with a report set to be released next year. Ford has announced it plans to end manufacturing in Australia and Holden is considering its position. The report says if car manufacturing completely ended in Australia in 2018, there would be a $7.3 billion permanent hit to the economy. With the job losses involved Australians would spend $21.5 billion less. The federal government currently subsidises the industry by about $500 million a year. It says continued government support is critical to maintaining the industry. "There is little or no doubt that without this support ... the major car companies will not invest in new models in Australia," it states. The removal of this support will make car manufacturing uncompetitive relative to locations elsewhere. FCAI chief executive Tony Weber said the government investment had flow on effects of other industries which would also be lost if car manufacturing stopped. Deputy prime minister Warren Truss said on Sunday it would be tragic for Australia to lose its car manufacturing industry but there has to be a limit on taxpayers subsidies. The chamber will use the report as the basis of its submission to the Productivity Commission inquiry. Independent South Australian senator Nick Xenophon said the report laid out the impact of a local car industry shutdown in "chilling terms." "Make no mistake - while the closure of the car industry would have an impact of earthquake proportions in Adelaide and Melbourne, those tremors would be felt right across the country," he said in a statement. He said the $500 million a year automotive subsidies paled in comparison with the federal government's planned $5.5 billion a year paid parental leave scheme.