Two Fleets, Two Allies: Canada Considers Dividing Submarine Contract Between Germany and South Korea

Canada is considering dividing its multibillion-dollar submarine contract between two rival bidders — buying six vessels from Germany and six from South Korea — as the Carney government balances military priorities with trade diversification amid ongoing US tariff pressure, two senior government sources told The Globe and Mail.

The split-fleet option would assign six Type-212CD submarines from Germany’s ThyssenKrupp Marine Systems to Atlantic patrol duties, while South Korea’s Hanwha Ocean would supply six KSS-III Batch-II submarines for Pacific and Indo-Pacific deployment. 

Both companies submitted final proposals to Ottawa on March 2, meeting the government’s deadline for the Canadian Patrol Submarine Project — a procurement effort that could cost upward of $24 billion and rank among the largest military purchases in Canadian history.

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With the Royal Canadian Navy confirming that both designs meet its operational requirements, economic and industrial benefits have become the decisive factor. Secretary of State for Defence Procurement Stephen Fuhr said in February: “This sub purchase will come down to cost, timeline, and economic benefits to Canada.” 

Hanwha projects 25,000 Canadian jobs annually between 2026 and 2044, while TKMS — supplier of roughly 70% of NATO’s conventional fleet — has signaled it may build some submarines within Canada.

Defense experts have raised concerns over the complications of running two different submarine classes, including fragmented supply chains and parts inventories. Carney himself questioned a mixed fleet in September, saying Canada stands to gain “many efficiencies in economies of having one fleet.” 

Despite those reservations, Ottawa sees a split contract as a way to lock in industrial commitments from both countries as it deepens trade ties with Europe and Asia.

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Neither bid includes a car assembly plant, despite lobbying by Industry Minister Mélanie Joly to link automotive manufacturing to the deal. 

Related: Canada, South Korea Sign Auto Manufacturing Agreement Tied to Submarine Deal 

Hanwha Canada CEO Glen Copeland acknowledged that Canadian content requirements carry a price: “I think there’s an expectation that localization does come with a cost.” 

Ottawa has reserved the right to submit clarifying questions to both bidders before formal evaluation begins, with a decision expected as early as summer and a contract targeted before year’s end.

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