The Centre for Independent Studies says Holden would be liquidated if its troubled parent company General Motors filed for insolvency and sold off its global brands.
It also said government funding to build green cars were a form of "old-fashioned protectionism hiding behind a green smokescreen".
FCAI (Federal Chamber of Automotive Industries) chief executive Andrew McKellar dismissed the think tank's arguments as "cynical" and "plain wrong".
McKellar said GM saw Holden as a "viable operation", citing a restructuring plan given to the US Treasury last month.
GM is relying on US government finance to avoid bankruptcy.
"It sees a long-term, viable future for Holden," McKellar said. "That's an important vote of confidence."
The research paper argued the local car industry faced collapse even as the government gave it $6.2 billion during the next decade to upgrade factories and equipment.
"The plan did not make sense when it was launched and makes even less sense now," researcher Oliver Hartwich said. "It should have been obvious that the Australian car industry was facing existential difficulties."
Scrapping import duties and abolishing the luxury car tax would do more to encourage consumers to buy fuel-efficient cars.
But McKellar said a four-cylinder Holden and a hybrid Toyota Camry would not have been built locally, from 2010, without help from the government's $1.3 billion green car fund.
"It's not a subsidy taken out of Australia and squirrelled away," he said. "It attracts innovation into Australia and facilitates innovation in new technologies."