Liberal MPs say they fear several of their federal seats in South Australia could be at risk if the Government gives Japan the contract for the next fleet of submarines.

With the state still reeling from the loss of thousands of car manufacturing jobs, employment remains a hot button political issue.

Liberal sources have told the ABC the contract for the next fleet of submarines will play a big role in its fortunes at the next federal election.

One Liberal said seats like Hindmarsh, held by first-term MP Matt Williams, would be under threat if the contract goes to Japan.

"I don't think it would be an electoral wipe-out ... [but] it would make it really hard for guys like Matt," he said.

"The easiest option [politically] would be for it to be done in South Australia."

Another MP said it would compound the risk of Lower House seats going to Independent Senator Nick Xenophon's party.

"[A] Japanese build would take Xenophon from a potential problem to a real threat," he said.

"A local build may not even see him run Lower House candidates."

But Hindmarsh MP Matt Williams said he would not speculate on talk he may lose his seat and was confident there would be more jobs in South Australia.

"I'm working as hard as anyone with some of my colleagues to maximise the opportunities and the jobs in South Australia for the defence ship industries, having meetings with senior Government ministers who are listening to the various options," he said.

"The Government has already committed to at least 500 more jobs in various areas of the next submarines project which is good news for South Australia.

"We've also got the frigate program which we'd hope to get some work for South Australia so there's opportunities for the defence sector and industry in South Australia."

Prime Minister Tony Abbott said while the Government was yet to decide how or where the submarines would be built, he gave a guarantee there would be more jobs for South Australian ship builders.

"Whatever happens, I can give an absolute, categoric guarantee there will be more sub jobs in SA and I think that's what South Australians understandably want," he said.

"They want a good deal for our country. They want a good deal for their state. They want the best possible submarines and that's what we are determined to deliver."

The Government is running what it has called a competitive evaluation process for the contract — which could go to France, Japan or Germany.

In February, Defence Minister Kevin Andrews said he expected significant work would be undertaken in Australia, particularly during the build phase, leading to the creation of at least 500 new jobs.

Mr Andrews said many of those jobs would be in South Australia.