In a significant development for Canada’s naval capabilities, Prime Minister Mark Carney is set to reveal the outcome of a competitive bidding process for a contract that could reshape the Royal Canadian Navy. Scheduled for announcement in Halifax on Monday, the decision comes after intense deliberations between German firm TKMS and South Korea’s Hanwha, both vying to secure a lucrative deal to supply twelve diesel-electric submarines. This procurement promises to enhance Canada’s maritime defence and could represent a pivotal moment in the country’s military procurement history.
A Historic Decision Ahead
The forthcoming announcement will mark the conclusion of a fiercely contested campaign between two formidable contenders. Carney’s government has been under pressure to finalise its choice by the end of June, yet the exact date of the announcement had remained uncertain until now. Sources close to the matter, who wished to remain unnamed, indicated that the Prime Minister’s decision would be revealed just before he departs for the NATO summit in Turkey.
While the announcement is expected to name a preferred bidder, it is crucial to note that this does not equate to an immediate contract signing. According to Philippe Lagassé, a defence policy expert at Carleton University, the winning company will enter a protracted negotiation process that may extend for years before a formal agreement is reached. The overall procurement is estimated to be valued between $20 billion and $30 billion, with operational and maintenance costs potentially reaching up to $50 billion.
Economic Stakes: Competition Beyond the Seas
The submarine contract is part of the Canadian government’s broader strategy to elevate defence spending to historic levels, targeting 5% of GDP by 2035—a response to NATO requirements. Both bidders have made compelling cases for their submarines, with Hanwha’s KSS-III Batch-II and TKMS’s 212CD models deemed suitable for Canada’s needs. However, the government has signalled that the ultimate decision will hinge more on the economic benefits each proposal brings rather than the vessels’ technical specifications.
Hanwha has committed to investing over $70 billion in trade and job creation in Canada, promising more than 25,000 jobs annually from 2026 to 2044. Conversely, Germany’s Defence Minister Boris Pistorius has touted the TKMS bid as a boon for the Canadian economy, projecting an $86 billion increase in GDP over the contract’s lifespan and the creation of approximately 650,000 job-years.
Discussions have surfaced regarding the possibility of splitting the contract between the two bidders, but government officials have downplayed this scenario in recent months.
Transforming Canada’s Naval Landscape
Should the Canadian government proceed with the acquisition of twelve submarines, it will be a transformative step for the Royal Canadian Navy, enhancing its operational capabilities significantly. Historically, Canada has relied on a mere four second-hand submarines, with only one typically operational at any given time. The plan to procure twelve submarines would allow for three vessels to be available for deployment simultaneously, vastly improving Canada’s ability to monitor and protect its coastal waters.
David Perry, president of the Canadian Global Affairs Institute, underscored the strategic importance of this procurement: “It will give us much more of an ability to independently know what’s happening around our own Canadian coastal waters.” This capability is especially critical as Canada grapples with increasing geopolitical tensions, particularly in Arctic regions and along its Pacific and Atlantic coastlines.
A Race for Influence
Since August 2025, both Hanwha and TKMS have engaged in a vigorous campaign to win over Ottawa, utilising various strategies to highlight their proposals. The South Korean company has actively showcased its technology, even dispatching a submarine to Canada earlier this year. This assertive approach has contrasted with the slower responses from Germany, which has historically maintained strong ties with Canada through NATO and other partnerships.
Industrial benefits have become a focal point in this bidding war, with both companies promising significant investments in Canadian industry. Hanwha’s proposal includes a commitment of $200 million to support Ontario’s Algoma steelmaker, alongside a pledge to purchase $50 million worth of steel for the submarine project. Meanwhile, TKMS emphasises the long-standing relationship between Canada and Germany, advocating for a collaborative approach in building, training, and maintaining submarines.
Why it Matters
The outcome of this submarine procurement process is more than just a financial transaction; it is a defining moment for Canada’s defence posture and industrial policy. Awarding the contract to either Hanwha or TKMS will not only enhance Canada’s naval capabilities but also signal a shift in its procurement approach, potentially welcoming non-Western suppliers into a traditionally Western-dominated arena. This decision could reshape Canada’s military alliances and economic landscape, setting the stage for a more independent and capable naval force in the years to come.
