In a significant move for Canada’s naval capabilities, Prime Minister Mark Carney is set to announce the selection of Germany’s Thyssenkrupp Marine Systems (TKMS) to construct a fleet of submarines. This decision, revealed by unnamed sources ahead of a formal announcement in Halifax, concludes a competitive bidding war between TKMS and South Korea’s Hanwha for a contract that promises to reshape the Royal Canadian Navy for decades.
Unprecedented Submarine Acquisition
The Canadian government’s decision to procure 12 submarines marks a historic shift in its defence strategy, enabling the country to enhance its maritime surveillance and deterrent capabilities. These submarines will provide Canada with an unprecedented ability to monitor its coastal waters discreetly. While the Prime Minister had previously indicated a decision would be finalised by June, the precise timing has remained fluid until now.
The announcement will precede Carney’s attendance at the NATO leaders’ summit in Turkey, signalling the importance of this contract within the broader context of Canada’s military commitments to NATO allies.
The Bidder Landscape
The submarine programme, valued between CAD 20 billion and CAD 30 billion for the vessels themselves, could extend to a staggering CAD 40 billion to CAD 50 billion when accounting for operations, maintenance, and upgrades. Despite TKMS’s selection, it is important to note that this announcement will likely identify a preferred bidder rather than a definitive contract, as negotiations are expected to continue for several years.
The competition has been fierce, with both TKMS and Hanwha aggressively marketing their respective submarines. The latter’s KSS-III Batch-II submarine and TKMS’s 212CD model were both deemed suitable for Canadian needs. However, the economic benefits that each company could deliver ultimately influenced the government’s decision.
Hanwha has made bold commitments, pledging over CAD 70 billion in trade and investment in Canada, alongside the creation of more than 25,000 jobs annually from 2026 to 2044. Conversely, TKMS has asserted that its proposal, in collaboration with Norway, promises to contribute CAD 86 billion to Canada’s GDP and generate an estimated 650,000 job years throughout the agreement’s lifespan.
Strategic Implications for Canada’s Military
Historically, Canada has struggled with its submarine capabilities, having not purchased new submarines since the Cold War. The current fleet consists of four second-hand submarines, with only one typically operational at any given time. The anticipated acquisition of 12 submarines would enable Canada to deploy three vessels simultaneously, significantly bolstering its underwater surveillance and deterrence.
David Perry, president of the Canadian Global Affairs Institute, emphasised the transformational impact of this procurement, stating, “It will give us much more of an ability to independently know what’s happening around our own Canadian coastal waters.” The new submarines will serve as stealthy deterrents against potential threats in the Arctic, Pacific, and Atlantic regions.
Rivalry Fuels Competitive Dynamics
Since August 2025, both TKMS and Hanwha have engaged in a vigorous campaign to secure support from Ottawa. The Carney government has leveraged this rivalry to extract commitments that align with its industrial policy, which seeks to bolster Canadian manufacturing and reduce reliance on foreign suppliers.
Hanwha’s proposal includes substantial investments in local industries, such as a USD 200 million commitment to assist the struggling steelmaker Algoma. Such pledges exemplify the aggressive industrial strategy employed by both contenders, with South Korea notably sending a submarine to showcase its technology and capabilities.
German officials, including Defence Minister Boris Pistorius, have been keen to highlight the long-standing partnership between Canada and Germany, particularly through NATO ties. The collaborative nature of the TKMS bid, which involves Norway, has been presented as a means to foster a robust and modern submarine fleet among NATO allies.
Why it Matters
The decision to award the submarine contract to TKMS represents more than just an enhancement of Canada’s naval capabilities; it signifies a pivotal moment in the nation’s defence strategy. This procurement not only addresses historical deficiencies in Canada’s military presence under the waves but also aligns with broader geopolitical imperatives amid rising tensions in global waters. As Canada commits to increasing its defence spending to 5% of GDP by 2035, the implications of this contract will resonate throughout the military and industrial sectors for years to come, potentially reshaping the landscape of Canadian defence and its position within NATO.