The Swedish defense company Saab Group defended its submarine-making capacity after Australia's Prime Minister Tony Abbott spoke dismissively of the company and excluded Sweden from Australia's submarine-purchasing shortlist, sources say.

Abbott said that Sweden had only refurbished ageing submarines in the past 20 years and had not designed and built new ones.

“The last Australian submarine came off the production line in about 2001…the last Swedish submarine came off the production line in 1996, so it’s almost two decades since Sweden built a submarine,” Abbott said.

He made the remarks as his government formally invited France, Germany and Japan to enter a contest to build Australia’s new submarines, allowing for a possible partnership with Australian shipbuilder ASC.

Gunilla Fransson, the head of Saab defense and security, said in turn that Saab plans to start building Sweden's next-generation submarine and has the core skills needed for the market.

"Saab has delivered six submarines since 1996, the latest of which was commissioned in 2013. All involved significant numbers of design and production engineers with the same skills used in any new submarine build process. Saab is also currently approaching the end of a detailed design phase for Sweden’s next generation submarine and are about to enter into the production phase," Fransson said.

Sweden is believed to be one of the few countries in the world to be developing a next-generation submarine, and Saab earlier said that "a partnership would provide Australia with an opportunity to have an advanced submarine which meets Australia’s unique requirements."

Australia plans to construct at least 12 submarines that will have the same features as those already used by the Australian navy, but would be capable of more sophisticated stealth and sensor performance.

Meanwhile, Australian Defense Industry Minister Martin Hamilton-Smith has said that the South Australian government would appeal for Saab's Kockums shipyard to be re-included in the submarine-buiildig process.