Melbourne's former Holden factory would become a plant for high-tech war machines, creating hundreds of jobs, under a bid put forward by a defence manufacturer and backed by the Victorian Government.

BAE Systems hopes to build 225 Land 400 AMV35 military vehicles at the Fishermans Bend site, in inner Melbourne, but is competing for the contract with a German company that would build similar vehicles in Queensland.

The Federal Government is expected to decide early next year whether the tender goes to BAE or Rheinmetall Defence, which plans to build the armoured vehicles in Queensland's south-east.

What can the AMV35 do? BAE says the AMV35 is a versatile combat vehicle that is easy to manoeuvre and has "exceptional strategic and tactical mobility"

BAE says the AMV35 is a versatile combat vehicle that is easy to manoeuvre and has "exceptional strategic and tactical mobility" Similar vehicles are used by seven countries, including Afghanistan and Poland

Similar vehicles are used by seven countries, including Afghanistan and Poland It can open fire to a range of more than 4,000 metres from a 35mm gun turret

It can open fire to a range of more than 4,000 metres from a 35mm gun turret The AMV35 would replace the Army's Australian Light Armoured Vehicle (ASLAV) (Source: BAE Systems)

Victoria's Industry and Employment Minister Wade Noonan said the contract could lead to the creation of up to 2,000 jobs and help those who had lost employment in the struggling car manufacturing sector.

"There are thousands of workers who have dedicated their careers to building, or have built cars for the Australian industry," he said.

"These workers could now play a really critical role in building a new generation of armoured vehicles to protect Australian troops.

"This puts Victoria firmly in the race to be the home of military vehicle building."

A site at Fishermans Bend would be developed for a plant if Victoria wins the contract. ( Supplied )

Mr Noonan said the Government would develop the site at Fishermans Bend to make way for an assembly plant, which would be operational by late 2020, if BAE Systems won the contract.

The Government bought the 37-hectare Holden manufacturing site last year for $130 million with plans to turn it into a hub for high-end industries.

New chance at jobs for car manufacturing workers

Mr Noonan said other Victorian parts manufacturing businesses also stood to gain.

"We see this as a really terrific opportunity to create an ecosystem of international companies who really are forward-looking in terms of what they can create," he said.

The maker of the Boxer CRV military vehicle says it is safer than other similar vehicles. ( Twitter: BOXERCRV )

"The close proximity to both the CBD and the port makes Fishermans Bend a very attractive proposition.

"And with supply chain businesses, the value of this project will be carried across Victoria from Geelong to Moorabbin where many of those supply chain companies operate."

The director of the Australian Industrial Transformation Institute at Flinders University in Adelaide, John Spoehr, said former automotive workers could be hired to help build the vehicles.

"Making defence vehicles is not like making cars but there are lots of skills that are transferrable," Professor Spoehr said.

"Particularly those high-end qualifications and skills in engineering, fabrication, smart forms of manufacturing, on more bespoke assembly lines."

Ford shut down its assembly plant in Melbourne last year. Holden and Toyota will do the same in Adelaide and Melbourne in October.

Queensland lobbying PM for contract

Mr Noonan confirmed the Government had financially backed BAE's bid, but would not release details, citing commercial confidentiality.

Queensland's Palaszczuk Government has backed Rheinmetall Defence's bid to build a different vehicle, the eight-wheel-drive Boxer CRV, in that state.

The Queensland Government and Queensland-based federal MP Jane Prentice have been lobbying Prime Minister Malcolm Turnbull for the contract.

Rheinmetall Defence recently told the ABC's AM program the Boxer CRV had superior safety over other similar armed vehicles.

But Victorian Premier Daniel Andrews said the AMV35 armoured vehicles were lighter, cheaper and more nimble.

The bids need to be submitted to the Federal Government by August 11.