Announced over the weekend as part of a statement on its spending programs should it be re-elected, the Gillard Labor Government has cut $200 million from its $1.3 billion Green Car Innovation Fund.
"'This will ensure that the Green Car Innovation Fund better reflects demand for the program," the statement reads.
Originally pledged over ten years, well beyond the life of the Rudd Government that proposed it, the fund was designed to encourage manufacturers to develop cleaner and more efficient vehicles.
Its intent was to "enhance the research and development and commercialisation of Australian technologies that significantly reduce fuel consumption and/or greenhouse gas emissions".
While the programme has been criticised by some as protectionism for local manufacturing, it was announced at a time when US parent companies were in crisis and rapidly 'downsizing' their global operations and shedding production facilities at home and off-shore.
Under the scheme, which remains in operation, grants are provided at a ratio of $1.00 of government funding for every $3.00 invested by the business.
The big-ticket beneficiaries of the fund thus far include Toyota, which gained $35 million to assist in the development of local production for the Hybrid Camry. Holden got a larger slice, receiving a $149 million grant for the Australian-built 2011 Cruze.
Ford too has benefited from a $42m Green Car Fund investment toward its upcoming four-cylinder EcoBoost Falcon and diesel Territory models. Numerous parts and component manufacturers have also benefited under the fund.
Federal Chamber of Automotive Industries CEO Andrew McKellar said that the budget cut "raises some questions," having been made without industry consultation in the middle of an election campaign.
The cut comes just weeks after the Labor Government announced plans for a Cleaner Car Rebate, aimed at getting older and less fuel-efficient vehicles off the road. Shadow Industry Minister Sophie Mirabella described the cut as "a sign of policy confusion."