Liberal MPs are reportedly afraid of losing seats in South Australia if Japan builds the nation’s new submarine fleet.

The voter backlash would be severe if the state’s ship builders miss out on the the contract, Liberal sources told both the ABC and Sky News.

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“The easiest [political] option would be for it to be done in South Australia,” an anonymous source told the ABC.

The political embarrassment would likely benefit candidates endorsed by Nick Xenophon, not Labor.

“[A] Japanese build would take Xenophon from a potential problem to a real threat,” said another source.

The Independent senator, based in South Australia, has announced he will field candidates in Liberal-held seats in the state to pressure the government to build the submarines locally.

“I’m working very hard to get a number of really credible, strong lower house candidates,” he told Sky News on Tuesday.

The government will consider bids from Japan, France and Germany as part of what it calls a competitive evaluation process.

Parliamentary secretary Steve Ciobo conceded there was understandable concern from some of his SA colleagues about the process.

But he accused Labor of “kicking the can down the road” for six years on naval shipbuilding in Australia, referring to the absence of any domestic contracts from the Rudd and Gillard governments.

Opposition frontbencher Brendan O’Connor claimed Prime Minister Tony Abbott had already done a secret deal with Japan.

Australia needed to predominantly build and maintain the fleet, otherwise the local manufacturing industry would be decimated, he said.

-with ABC, AAP.