EFFORTS to replace one third of the Australian Defence Force's Land Rovers with Bendigo-built Hawkei are "under threat" as delays and reliability issues bite.
Thales landed the project to supply 1100 of the vehicles in 2015 and they will be the only vehicles armoured to protect soldiers from blasts and still be light enough to be lifted by Chinook helicopters.
The $2 billion project is one of five where "ongoing issues" are bringing an element of uncertainty to Defence's refresh of its trucks, strike fighters and battle ships, a 2018-19 major projects audit has found.
The Hawkei project has been beset by reliability and design issues, plus delays in production according to the report, which was released by the Australian National Audit Office.
There has been a 21 month delay after testing uncovered engineering issues that needed to be rectified, the audit reported.
That has delayed other elements of the project. Defence is now expecting 138 initial Hawkeis and trailers in May, 12 months behind schedule.
Last August, Thales told Defence it had bought a company responsible for some of the delays in a bid to keep up a supply of Hawkei engines, the audit stated.
German firm Steyr Motors went into voluntary administration earlier this year, prompting questions in parliament over whether 150 Bendigo Thales staff members could be stood down without pay.
Ultimately, production shut down for just a week over Easter and a joint Thales and Defence delegation traveled to Germany to see what they could do to avoid further problems.
Despite the production problems, Thales has told Defence it is confident it can make up delays and roll out all vehicles - plus trailers, training and support systems - by June 2023, the audit stated.
Senior Defence personal have told auditors they are working closely with Thales and that they consider risks to the project to be "manageable".
Other Defence projects experiencing delays include new strike fighter jets, where there are risks including escalating costs, and a project for more ships capable of landing helicopters, where there is a need for ongoing testing, defects and deficiencies.
The audit also focused on 20 other Defence projects were developing as planned.