In a significant move for Canada’s military capabilities, Prime Minister Mark Carney is set to announce that German company Thyssenkrupp Marine Systems (TKMS) will construct a fleet of submarines for the Royal Canadian Navy. This decision, the result of intense competition with South Korea’s Hanwha, marks a pivotal moment in Canada’s defence strategy as it seeks to bolster its underwater presence amid increasing geopolitical tensions. The formal announcement is expected to be made in Halifax on Monday, just before Carney departs for the NATO leaders’ summit in Turkey.
A Transformative Defence Procurement
The Canadian government has decided to proceed with TKMS, which is set to deliver twelve state-of-the-art diesel-electric submarines, a crucial asset for enhancing Canada’s maritime surveillance capabilities. This procurement is anticipated to cost between $20 billion to $30 billion solely for the submarines, with total expenses—including operations and maintenance—potentially reaching up to $50 billion. While the announcement will identify TKMS as the preferred bidder, it should be noted that a final contract is yet to be negotiated, which could extend the timeline significantly.
Canada’s submarine fleet has remained stagnant since the Cold War, relying on four second-hand submarines, only one of which is typically operational. With the acquisition of these new vessels, the Royal Canadian Navy will not only augment its capabilities but also ensure that it can effectively monitor its vast coastal waters, crucial for national security.
Economic Implications and Industrial Partnerships
The competition for the submarine contract has not merely revolved around military specifications but has also heavily weighted economic considerations. Both TKMS and Hanwha have made substantial promises regarding industrial benefits, aiming to secure a greater foothold in Canada’s defence sector. Hanwha has committed to investments exceeding $70 billion and the creation of over 25,000 jobs annually from 2026 to 2044, while TKMS projects an economic contribution of $86 billion to Canada’s GDP over the life of the agreement, equating to approximately 650,000 job years.
These commitments reflect the Canadian government’s broader strategy to enhance domestic industrial capacity in response to growing protectionist sentiments from the United States. The successful bidder will not only be tasked with delivering submarines but also with fostering a robust Canadian defence industrial base.
The Competition: Hanwha vs. TKMS
The rivalry between Hanwha and TKMS has been characterised by aggressive marketing and public diplomacy efforts. South Korea’s campaign has been particularly visible, featuring high-level visits and demonstrations of submarine technology. Conversely, German officials have sought to highlight their longstanding partnership with Canada, particularly through NATO, and emphasise TKMS’s extensive experience in submarine construction.
Despite initial discussions about a potential split contract, government officials have downplayed this scenario, indicating a strong preference for a single contractor to streamline operations and maintenance. This decision is expected to lay the groundwork for a more formidable naval fleet, which would be unprecedented in Canada’s history.
The Future of Canada’s Naval Power
With the announcement of TKMS as the preferred contractor, Canada is poised to undergo a transformative shift in its military capabilities. The acquisition of a dozen modern submarines will enhance the Royal Canadian Navy’s operational readiness, allowing for three submarines to be deployed simultaneously—a significant upgrade from current capabilities. Defence experts, including David Perry from the Canadian Global Affairs Institute, highlight that this enhancement is essential for maintaining sovereignty over Canada’s extensive coastal waters.
The decision also signals a departure from historical procurement processes, where U.S. contractors often dominated the landscape. With no American bidders in the fray, Canada has greater latitude to select a partner based on its own strategic needs rather than external pressures.
Why it Matters
This submarine procurement is more than just a military upgrade; it represents a strategic pivot in Canada’s defence posture and its economic landscape. As the country prepares to invest significantly in its naval capabilities, it also aims to solidify its defence industrial base, ensuring long-term benefits for the Canadian economy. By choosing TKMS, Canada not only enhances its military readiness but also reinforces its commitment to fostering international partnerships that align with its national interests. The stakes are high, and the implications of this decision will resonate for decades to come, shaping the future of Canadian defence policy and industry.
