Luring another car manufacturer to take over Holden's facilities should be "put on the table" to handle the company's decision to quit vehicle production, independent Senator Nick Xenophon says.
Senator Xenophon says expanding Toyota's operations in Melbourne, to help support the component sector, should also be an option.
"But you need to have other manufacturers," he told reporters in Adelaide on Friday.
"Simply having one manufacturer, the last manufacturer standing, is very risky in itself.
"Having another manufacturer makes more sense and that needs to be put on the table."
Senator Xenophon said Holden's facilities in Adelaide and in Melbourne should not be allowed to be demolished or dismantled.
He said while Australia could not compete at the lower end of the car market, local producers could compete in the premium sector, building prestige vehicles.
"We can't compete with the cheap imports from Thailand and Korea but we can build some of the best cars in the world for the premium market," he said.
"Everything needs to be on the table. We cannot just roll over and die.
Holden will quit local production by the end of 2017, with about 2900 jobs to be lost.
The company has not indicated what will be done with its assembly plant in Adelaide or its engine plant and other facilities in Melbourne.
