Australian government has withdrawn its plan to cut $500m funding to domestic auto industry proposed under Automotive Transformation Scheme (ATS) scheme.

The funding cuts were announced last year, but it failed to get Senate approval.

ATS cuts would have deprived the auto component suppliers of vital funding they require to supply equipments to the auto manufacturers until the end of 2017.

Australia's auto manufacturing industry has slumped and only Ford, Holden and Toyota have their manufacturing facilities, which are also expected to wrap up production in 2017.

According to reports, 55% of the funding will be given to auto manufacturers, and the remaining 45% will be allocated to component makers.

An additional $400m initially committed for 2018 to 2021 will not be provided to the auto industry as now it will be booked as a budget saving.

The Guardian cited Australian Industry and Science Minister Ian Macfarlane as saying: "There was a level of uncertainty in the automotive industry and particularly the component industry that was concerning the government, in that we need the component industry to be there, the very last day that Holden and Toyota roll cars off the assembly line at the end of 2017.

"So we won't be proceeding with the cuts that were in the budget last year for the ATS."