Griffith University Taxation Lecturer, Anna Mortimore has weighed into the debate on how to save Australia's ailing car industry.

"Encouraging car makers to produce more fuel efficient cars will not save jobs or the industry," Ms Mortimore said.

"What is needed is an overhaul of the current taxation system and even greater financial incentives," she said.

"And this is in a climate where Australian car makers are already being subsidised directly or indirectly through tax benefits, to the tune of $10,000 per vehicle."

Ms Mortimore said the government subsidies, which are intended to encourage Australian consumers to buy a locally-made rather than imported vehicle, may be misguided.

"Australian Government may want local car manufacturers such as Toyota to build more fuel-efficient vehicles in Australia, but they only need to look at the poor sales of the Australia's first hybrid to be discouraged from considering it a viable proposition," Ms Mortimore said.

"To believe that consumers will naturally buy hybrids or electric vehicles if they are available is a misconception," she said.

"This is evident considering that the sale of hybrids in 2010 was 0.6% of total sales compared to 0.7% in 2009."

Ms Mortimore said given these statistics, no amount of funding will encourage local car manufacturers such as Toyota to increase their production of hybrids or alternative fuel vehicles.

"Australia must be prepared to introduce direct cash incentives, reform the taxation system, lower the price of diesel compared to petrol, and set lower mandatory emission standards in line with global standards," Ms Mortimore said.

"Unless the government can achieve these goals, no amount of innovation will save the ailing Australian car industry and its jobs," she said.