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The South Korean defence giant Hanwha is making significant strides in its bid to secure the contract for Canada’s next generation of submarines. In a strategic move announced on Wednesday, Hanwha has established a joint venture with the Automotive Parts Manufacturers’ Association (APMA), pledging to manufacture military and industrial vehicles within Canada, utilising local auto parts and workforce. This commitment is set against the backdrop of a revised bidding process, as the Canadian government aims to enhance the economic benefits tied to this lucrative defence contract.
A Game-Changing Joint Venture
At a ceremony held in Vaughan, Ontario, Hanwha’s CEO Jae-il Son was presented with a commemorative tank replica by APMA President Flavio Volpe. This joint venture marks a pivotal step in Hanwha’s approach to not only winning the submarine contract but also contributing to Canada’s industrial capacity. The agreement promises to generate substantial economic activity by manufacturing vehicles tailored for both the Canadian Armed Forces and other governmental agencies.
The revised bids for the submarine project are due soon, following an extension granted by the Canadian government. The only contenders remaining in the race are Hanwha and Germany’s TKMS, both of which are vying to build up to 12 submarines. This competition is intensified by the need to present robust industrial benefits, a critical component of any successful defence contract.
Addressing U.S. Protectionism and Economic Sovereignty
Canada’s automotive sector faces a precarious future, particularly in light of recent U.S. tariffs on foreign-assembled vehicles. The automotive industry has been a cornerstone of Canada’s economy, and the imposition of a 25-per-cent tariff on vehicles has raised concerns about the sector’s viability. The current government, under Prime Minister Mark Carney, has urged submarine bidders to include commitments for domestic vehicle manufacturing as part of their proposals—a request that Hanwha has responded to with this venture.
Flavio Volpe articulated the significance of this agreement, stating, “Today’s agreement is a historic commitment to shaping the future of Canada’s defence industry together.” He emphasised that it aligns perfectly with the Canadian government’s “Build in Canada” principle, aimed at bolstering national defence through local manufacturing.
Promises of Job Creation and Technological Advancement
In a bid to strengthen Canada’s industrial sovereignty, Hanwha’s plan involves the production of a range of vehicles, including advanced military technologies such as the K9 Thunder howitzer and the Redback infantry fighting vehicle. By committing to Canadian-made parts and materials, including locally sourced steel and aluminium, Hanwha aims to sustain tens of thousands of jobs within the automotive sector.
Steve Jeong, head of Naval Ship Global Business at Hanwha Ocean, reiterated this commitment, highlighting that the proposal is not merely an offer for submarines, but a broader pledge to enhance Canada’s manufacturing capabilities. The joint venture is designed to ensure that Canada has a sovereign automotive unit dedicated to the design and production of non-commercial vehicles for military and governmental use.
Competitive Landscape of the Submarine Bidding
The stakes in this bidding process are exceedingly high, with the total value of the submarine contract estimated between CAD 60 billion and CAD 120 billion over its lifecycle. This includes an acquisition cost projected at CAD 24 billion to CAD 30 billion. The Canadian government has extended the bidding period, providing both candidates the opportunity to refine their offers and emphasise their contributions to the local economy.
Hanwha’s proposal, which features the KSS-III Batch-II submarine, positions it strongly against TKMS’s offering of the 212CD submarine, part of a collaborative German-Norwegian initiative. As the Canadian government looks to enhance its defence capabilities, the emphasis on industrial benefits will be a critical factor in the final decision.
Why it Matters
The outcome of this submarine contract could have profound implications for Canada’s defence industry and automotive sector. Hanwha’s commitment to local manufacturing not only promises to create jobs and support the economy but also seeks to establish a long-term partnership that could redefine Canada’s approach to defence procurement. In a global landscape marked by increasing protectionism, this initiative may help Canada fortify its economic sovereignty while simultaneously enhancing national security. The government’s focus on domestic capabilities, coupled with the potential economic benefits of such contracts, underscores the importance of this decision for the future of Canadian industry.
