BAE picks Victoria for Land 400 bid

Melbourne's old Holden factory could be back in action by 2020 building combat vehicles, if defence giant BAE Systems wins a $5 billion contract.

The company is one of two short-listed bidders to produce the Land 400 AMV35 military vehicles, and has already chosen its preferred manufacturing site.

Victorian Premier Daniel Andrews said the plan would create thousands of jobs in manufacturing and had bipartisan support with the state's federal coalition MPs backing the bid.

"This is an outstanding bid," Mr Andrews said on Tuesday.

"To go somewhere else, unproven and starting from scratch that would be to miss an enormous opportunity."

People from the auto industry could also transition into the defence manufacturing sector.

"I'm certain that the knowledge and capability of the personnel from auto will find their way into this work," Mr Andrews added.

Phase two of the project is worth $5 billion and will create up to 2000 jobs.

BAE System chief executive Glynn Phillips said between 200 to 250 direct jobs would be based at the old Holden facility with more jobs created through the supply chain.

The preferred bidder is expected to be known by late 2017 and the facility could be up and running by 2020, Mr Phillips said.

Federal Coalition members from Victoria including Sarah Henderson and Kevin Andrews attended the announcement.

Coalition MPs are working "very, very hard" to secure the contract, Ms Henderson said.

"This is the best place to make the Land 400 and to make manufacturing a long term vision here in Victoria," she said.

The Bushmaster and Hawkei vehicles are already being manufactured for the armed forces in Bendigo.

Victoria has signed an agreement with BAE to build the vehicles at the old Holden site in Fisherman's Bend in Melbourne.

The other bidder, German company Rheinmetall, has chosen Queensland as its preferred site if it wins the contract over BAE.