hybrid cars don't cause more pollution. this myth about the environmental impact of the nickel-metal hyride batteries in hybrid cars (particularly, the toyota prius) derives from the erroneous assumption that such batteries wouldn't last longer than 160,000km, proven wrong on the evidence of the hundreds of priuses used as taxis that haven't required battery replacements until 250,000km+. as lithium-ion battery technology improves, nickel-hydride batteries won't even be an issue.
the production pollution of hybrid cars is higher, but is fully compensated for by the lower emissions in use. furthermore, due to the use of rare earth metals, hybrid cars far more recyclable components than other cars.
subsidising the australian auto manufacturing industry while it slowly dies involves a whole lot of pork, but is the only responsible policy. the other option is long term unemployment.