One Dunedin car dealer spoken to yesterday said dealers were shocked by the suggestion, which could prompt restructuring that could cost jobs.
Otago Chamber of Commerce chief executive John Christie also expressed concern, saying the council was a big buyer and any such move would send a "hugely wrong signal" to Dunedin businesses.
However, council city environment general manager Tony Avery said while the suggested change was still being considered, a change in the buy-local policy was now considered "unlikely".
Their comments came after the Otago Daily Times earlier this week reported a review of council fleet costs resulted in 14 recommendations designed to save money, including an end to the council's buy-local policy.
The review was conducted by Auckland-based consultant Management Toolbox, which concluded its recommendations could together shave at least 20% from fleet costs within the council's water and waste services unit within three years.
The report was still being considered by council staff, who had yet to accept any of the recommendations.
A peer review by FleetSmart disagreed with ending the buy-local policy, saying savings would not be realised.
Dunedin City Motors dealer principal Robert Bain, whose company runs Ford and Mazda dealerships in South Dunedin, said yesterday the suggestion had come as "a bit of a shock".
The council was a "significant" customer and losing its business would prompt restructuring and threaten jobs.
"It would have an impact that would be significant enough that you'd have to review how you did your operation. It could mean anything from having to restructure your business to survive."
He felt the review incorrectly implied dealers were "not providing the best deals locally, which is just rubbish".
Councils across New Zealand were offered standard discounts by vehicle manufacturers, meaning deals were the same around New Zealand.
It was a point noted by the FleetSmart peer review, which concluded the discounts would not change unless the council committed to buying multiple vehicles from one supplier.
"But I personally don't favour that," Mr Bain said yesterday. "I think they've got it right in actually spreading it around all the ratepayers."
Any change would encourage other buyers to also look outside Dunedin for cheaper vehicles, and Mr Bain believed the council should continue supporting local businesses where possible.
"If your local council doesn't buy off you, how can you expect your other local ratepayers to [buy] locally as well?"
Cooke Howlison managing director John Marsh said he would be "disappointed" if cars from outside the city were supplied to the council, given his company employed 110 workers in Dunedin and contributed "hundreds of thousands of dollars" to community causes.
However, he was confident his company's five Dunedin dealerships - four of which supplied the council - would not be undercut, even if the recommendation was adopted.
Prices at the company's Dunedin dealerships were "consistent" with those elsewhere - for example in Christchurch - and "the savings just aren't there to be had".
"It's paper-thin, the margins at the moment."
Mr Christie said he was yet to see the full reports, but the suggested change was "quite concerning". There appeared to be no competitive advantage in ending the buy-local policy, only a down side for Dunedin businesses, he said.
"All it's doing is precluding local operators from being able to participate in supplying council. If we can't support our own people, then I think we're doing a big disservice to our local business community."
Mr Avery said there remained differing views from consultants on the buy-local policy, but staff managing the council's vehicle fleet also felt the best deals were already being achieved.
"Based on the peer review, we're unlikely to change that policy. Clearly, we need to make a decision, but if the peer review is right and we do actually get the same prices as if we bought nationally, then why would we change?"
