Federal politicians could soon be chauffeured to work in a new BMW or Mercedes, as the Commonwealth looks to upgrade its fleet of official vehicles known as 'COMCAR'.

Key points: BMW is considered by industry insiders to be the preferred manufacturer

BMW is considered by industry insiders to be the preferred manufacturer Labor wants the Commonwealth to preference car companies undertaking research and development in Australia

Labor wants the Commonwealth to preference car companies undertaking research and development in Australia Senator Kim Carr said the move highlights the death of Australia's car manufacturing industry

From early next year the Finance Department will begin trialling new cars to replace the ageing COMCAR fleet, which is currently made up of mainly Australian-built Holden Caprice sedans.

COMCAR is used to transport federal politicians, judges and other dignitaries to official work engagements.

Following the recent closure of Australia's car manufacturing industry, the ABC can reveal the new fleet will be selected from imported models including Hyundai, BMW, Toyota and Mercedes.

"The current fleet is being maintained and extended to their full life," the Finance Department said in a statement to the ABC.

The Finance Department said COMCAR conducted an initial assessment of 18 vehicles which could potentially be used for the "provision of car-with-driver services for COMCAR clients".

"Of the vehicles assessed, seven vehicles were considered for inclusion in the trial.

"These vehicles were selected due to meeting a number of key criteria, including whole-of-life costs, overall value for money, fit for purpose, protocol and environmental considerations."

Industry insiders said BMW is considered the early favourite to win the COMCAR fleet contract given the German manufacturer already supplies the Commonwealth's current armoured vehicles, which are used to transport VIPs such as the Prime Minister.

The ABC has been told "luxury" vehicles that retail for about $100,000 including the BMW 5 series (520d and 530d), as well as the Mercedes E220 are likely to be among the models strongly favoured by the Commonwealth.

The replacement cars will be chosen from imported models including Hyundai, BMW, Toyota and Mercedes. ( Reuters: Vasily Fedosenko )

New fleet highlights 'tragedy' of car industry closure

Labor's Industry spokesman Kim Carr said the Commonwealth's impending purchase of new imported vehicles highlights the regrettable death of Australia's car manufacturing industry.

"It's a tragedy and it highlights yet again the foolhardy decision that this Government made to undermine, destroy our vehicle assembly in Australia," Senator Carr said.

Senator Carr said purchasing of government vehicles should give preference to those automotive companies which remain in Australia undertaking research and development.

"The Commonwealth could lead the way in being able to use its purchasing power in such a way as to attract new investment to the Australian automotive industry."