South Australia is set to be a key battleground in the next federal election, with local independent senator Nick Xenophon saying he wants to field a team of candidates in Lower House seats.

The high-polling independent told Lateline his Nick Xenophon Team (NXT) would be drawn from the political centre.

"The ambition is to run in all 11 lower house seats and if the election is held some time next year I expect that's what we'll have," he said.

South Australia is one of the smallest states in the federation, with its 11 seats out of 150 in Federal Parliament's lower house, but neither the Government nor Opposition can afford to ignore it.

The issue of a new submarines contract and the looming Holden plant closure in the state are already key issues.

South Australia's Labor Premier Jay Weatherill told Lateline it would be carnage for the Liberal party at the next election if they failed to stick to their commitment to build 12 submarines at Port Adelaide's ASC shipyard.

"If they don't get this decision right, the people of South Australia will respond, I think very assertively, at the ballot box," he said.

"[Liberal MP] Matt Williams would be gone at about half past six. If they do this the waves will be lapping up against the front doorstep of Jamie Briggs and certainly Christopher Pyne. There's no doubt about it."

Senator Xenophon has also called for the Government to honour its commitment on submarines.

"That's why I've urged the Government to be consistent to fulfil their election promise and to stop this nonsense of even flirting with the idea of building subs overseas," he said.

France, Germany and Japan are eyeing the $50 billion contract.

Japanese executives and defence officials had meetings in Adelaide on Wednesday and went out of their way to deny a secret deal with the Federal Government.

"Absolutely, there is no such a deal between the two governments," retired Admiral Takashi Saito said.

Subs have been a touchy topic — not least of all when former defence minister David Johnston said of the ASC he "wouldn't trust them to build a canoe".

Earlier this month Prime Minister Tony Abbott visited Adelaide to talk up shipbuilding in the state.

He announced a plan to build a fleet of frigates and hinted at good news soon on submarines.

NXT could threaten safe seats

But if a deal fails to materialise, it could make the Nick Xenophon Team a danger for the major parties.

Australian National University Emeritus Professor John Warhurst, who was born and educated in South Australia, thinks the NXT alliance is a possible threat to some relatively safe seats.

"If he and his team standing in the lower house are polling anywhere near how he himself has managed to poll in the Senate, you know in the mid-20 per cent range, then he's a threat to both sides of major party politics," he said.

Senator Xenophon is one of Australia's highest profile independents and a renowned political stuntman.

Political stuntman: Senator Xenophon and an Elvis impersonator ambush the then defence minister, David Johnston. ( Supplied )

His attention-seeking exploits range from appearing with an Elvis impersonator to sing for shipbuilding jobs, to riding a miniature BMW in a protest over car perks for politicians.

This week the senator adopted a more serious tone during a visit to Supashock, in the outer Adelaide suburb of Magill.

The company has created jobs by making custom suspension for heavy duty mining trucks and lightweight Formula One cars.

Senator Xenophon sees this sort of business as the future for the state's auto industry.

"Once Holden leaves South Australia as a car maker at the end of 2017 there'll be a huge void that will be left. There are something like 25,000 jobs that are at stake conservatively," he said.

He warned that unless the void was filled with new innovative businesses in the auto supply chain there would be massive job losses in South Australia and in Victoria.

Holden closure 'a slap in the face'

Two months after the 2013 federal election, Holden's parent company General Motors announced that it would discontinue vehicle and engine manufacturing in Australia by the end of 2017.

Holden's Elizabeth plant had been the pride of South Australia for decades.

Dr Warhurst described the whole Elizabeth area in Adelaide's north as a sign of the growth of South Australia over the last 50 years or so.

But he said Holden's decision to close was a major blow.

"For a state that sees its place in the federation under challenge, and being relegated to one of the also rans in the federation to have a major decision like that was a major slap in the face for South Australians," he said.

Meanwhile, South Australia's business leaders are urging state and federal politicians to invest in education and skills development.

Niki Vincent, chief executive of the Leaders Institute of South Australia, said the transformation would be challenging.

Dr Vincent pointed to Denmark as a model for dealing with industries in decline.

Denmark's shipbuilders have been retrained to work in aged care.

"Because that's a growing industry in Denmark, and it's that kind of thinking that we need to do in South Australia," she said.