Canada has selected a German consortium, ThyssenKrupp Marine Systems (TKMS), to build 12 cutting-edge submarines in one of the country's largest-ever defence contracts. The announcement was made on Monday by Prime Minister Mark Carney, who said the deal will deepen Canada's NATO ties ahead of a crucial summit this week.
Bidding War and Selection
The contract, estimated to be worth more than US$12bn (£9bn), also includes roughly half a century of maintenance, pushing the total bill potentially above US$70bn. TKMS beat South Korean rival Hanwha Ocean after a tightly contested battle. Both companies had promised tech-heavy submarines and spillover economic benefits to Canada.
TKMS is the largest manufacturer of non-nuclear submarines and a key supplier of NATO's fleet. Canada had previously indicated that both firms' diesel-electric offerings – the 212CD model sub from TKMS and Hanwha's KSS-III Batch-II submarine – suited its military needs.
Replacing Ageing Fleet
The order marks the first time Canada has bought brand-new submarines. The Royal Canadian Navy currently operates four Victoria-class subs, bought secondhand from Britain in 1998, of which three are undergoing maintenance. The new subs will likely be used to strengthen Canada's foothold in the Arctic. TKMS vessels are designed with modern stealth technology to operate in contested areas with minimal detection, enabling lengthy surveillance missions in key Arctic routes, including the Northwest Passage.
Hanwha's vessels are substantially larger, and the company and industry analysts said they would have given Canada greater ability to deploy powerful weapons and conduct lengthy deep-ocean patrols.
Contract Negotiations and Economic Impact
Canada's federal government and TKMS will still need to finalise the contract through negotiations, a process that could take years. Carney took a delegation of senior cabinet ministers to visit TKMS's facility in Kiel, Germany, last year, and toured a newly built sub at Hanwha's facility in Geoje, South Korea.
Senior officials from both countries also visited Canada to sell the broader economic benefits of their pitches. German officials emphasised compatibility with NATO, and TKMS was reportedly hoping to expand the contract to include investments in rare earths, mining, artificial intelligence, and battery production for the automotive sector. South Korea is not a NATO member, but Hanwha said it would use steel from Algoma's plant in Sault Ste Marie, Ontario, to build armoured military vehicles in Canada. Hanwha also spent millions on an ad campaign featuring Canadian journalist Peter Mansbridge.
Defence Spending and NATO Commitments
Carney's Liberal party has committed to dramatically increasing defence spending, with a pledge to allocate 5% of GDP by 2035. Canada recently announced it hit 2% of GDP, a longstanding NATO target. The country has also suggested it is open to larger purchases from European contractors to lessen reliance on the US. It has already committed to buying 18 American-made Lockheed Martin F-35 Lightning II jets, but political tensions have pushed Ottawa to consider other vendors.
Canada is weighing the purchase of 72 Saab-made Gripen war planes. Saab has said that if Canada buys its latest-generation fighter, along with six GlobalEye surveillance aircraft already agreed, the deal would create up to 12,600 jobs in Canada.
On Monday, NATO Secretary General Mark Rutte told reporters that alliance members are about to announce billions in new contracts, calling it the 'crucial kit we need to deter and defend'.
