There are calls for governments to stop giving money to car manufacturer Holden after it axed 500 jobs in South Australia and Victoria.

Holden announced it would cut 400 jobs from its production plant in Adelaide and 100 vehicle development jobs in Victoria.

Just last year Holden received a $250 million state and federal government assistance package - part of $2 billion in subsidies the car maker has been given in the past 12 years.

Simon Cowan from the Centre of Independent Studies says thinning 500 more workers from Holden just means taxpayers are paying thousands of dollars more per head for those workers left.

"If you take about 4,000 employees, which is where they are now roughly, that's about $45,000 an employee," he said.

"After the loss of these 400 to 500 staff that then rises to more than $50,000 of subsidy per employee. It's quite a large sum of money."

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The Government's New Car Plan involves $3.4 billion in support for the industry The Government also provides grants to Ford and Holden to encourage innovation

The Government also provides grants to Ford and Holden to encourage innovation More than 1 million new vehicles are sold annually

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Toyota has the lion's share of the market, selling 18 per cent of new vehicles hitting the road. Next is Holden with 12.5 per cent, with Ford on 9 per cent.

Next is Holden with 12.5 per cent, with Ford on 9 per cent. In the passenger car market, imports outsell locally-produced vehicles by nearly 4 to 1.

In the passenger car market, imports outsell locally-produced vehicles by nearly 4 to 1. Australia's vehicle and components exports are worth $3.25 billion annually.

Australia's vehicle and components exports are worth $3.25 billion annually. The Middle East (44 per cent) is Australia's biggest automotive export market. All figures as of 2011. Read more here.

Mr Cowan says that kind of funding assistance is unsustainable.

"We're talking about a volatile market. We're looking at a trend where all the indicators are saying that the market in Australia is declining despite the level of subsidy," he said.

"If I was a worker in that industry I'd be very concerned, because from my perspective it looks like the entire industry is falling over."

Last year's funding deal between Holden and the Victorian, South Australian and federal governments came amid fears the company would close its Australian manufacturing bases.

In return for the assistance, Holden committed to investing $1 billion to make two new car models at its Adelaide plant, with a guarantee the carmaker would maintain its Australian operations for at least the next decade.

The deal also guaranteed minimum employment levels.

South Australian Premier Jay Weatherill told the ABC's 7.30 that today's cutbacks mean Holden has breached its agreement.

Mr Weatherill says his Government could now choose not to provide Holden with the funding.

"We need to reflect on what we've heard today. We want Holden to proceed with its $1 billion investment. This was to secure the period between 2016 and 2022. That remains very important," he said.

"This is an incredibly important employer in the north of South Australia so we now have to reflect on what this means for the whole agreement."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 4 minutes 28 seconds 4 m 28 s Holden job cuts renew debate about industry assistance ( Alexandra Kirk ) Download 2.1 MB

Mr Weatherill says the South Australian Government has been let down by Holden.

"I think we deserve better. There are a range of important undertakings in that agreement that I want to ensure are delivered to South Australians and now we need to have some serious discussions with the company," he said.

But Holden's chairman Mike Devereux denies they have broken the deal.

"We don't get any money [from the governments] until we start to bring that $1 billion to the table. And that doesn't begin to happen until the second half of this decade. That is still our plan," he said.

Support warranted

Meanwhile, Australian Manufacturing Workers Union president Andrew Dettmer says extra Government support is warranted.

"There are no viable vehicle industries in any country that are not subject to significant levels of support by government, and on world standard the Australian vehicle industry is supported much, much less than for instance the United States, much less than Japan, and much less than the European industry," he said.

The acting Minister for Climate Change, Industry and Innovation, Gary Gray, says the Federal Government remains committed to the industry.

"We will work with the industry to ensure it is sustainable in a period where the Australian dollar is very strong, for example trading at parity or higher with the US dollar," he said.

Mr Gray has defended multi-million-dollar assistance packages given to the company.

"That's where we believe the economic opportunities and jobs will be," he said.

The Victorian Government says it has been assured Holden will continue to manufacture cars in Australia until at least 2022.

Holden hopes enough people will volunteer for redundancies or retire by the August 1 to avoid the need for forced job losses.