Canada is preparing to acquire up to 12 diesel-electric submarines in a move that will significantly enhance the Royal Canadian Navy’s underwater capabilities for the first time since the Cold War. The planned procurement represents a major expansion, with current Canadian submarine forces limited to four second-hand vessels, only one of which is typically operational.

Officials from Ottawa have narrowed the competition to two contenders: South Korea’s Hanwha Heavy Industries with its KSS-III Batch-II submarines, and Germany’s Thyssenkrupp Marine Systems (TKMS) in partnership with Norway, offering the 212CD model. Both designs are deemed suitable for Canada’s requirements, so the final decision is expected to hinge largely on the economic benefits each bidder can provide to the Canadian economy.

Hanwha has pledged more than C$70 billion in trade and investment, promising to create over 25,000 jobs annually between 2026 and 2044. The Korean firm has also promised to invest US$200 million in Ontario’s Algoma Steel to help build a steel-beam mill and commit US$50 million in steel purchases for submarine construction. This high-profile bid is part of South Korea’s broader strategy to expand its defence industry footprint globally.

In contrast, the TKMS-Norway consortium has outlined an even larger projected economic impact, estimating it would contribute about C$86 billion to Canada’s gross domestic product over the contract’s lifecycle. German Defence Minister Boris Pistorius emphasized that the initiative would generate more than 650,000 job years of employment in Canada. TKMS, an established exporter with submarines sold to 20 navies, highlights its NATO partnerships and experience as key advantages, pointing to a long-standing relationship with Canada.

While there had been speculation about splitting the contract between the two bidders, Canadian government officials have largely dismissed this possibility in recent months. Instead, Ottawa’s approach has involved leveraging the competitive bids to fulfill its “Canada-first” industrial policy, aiming to bolster domestic manufacturing capacity amid growing concerns about U.S. protectionism.

The acquisition is expected to provide Canada with three submarines ready for deployment at any given time, reflecting military assessments that only about one in four vessels would be mission-ready due to necessary maintenance and training cycles. These submarines will bolster Canada’s ability to monitor and secure its Arctic, Pacific, and Atlantic coastlines more independently, enhancing deterrence against potential adversaries.

Observers note that this procurement contest differs markedly from previous Canadian defence competitions, such as the fighter-jet selection process, as there are no American bidders due to Canada’s requirement for non-nuclear, conventional submarines — a category no longer produced by U.S. manufacturers. The competition is thus shaped more by economic factors and international diplomacy than by traditional alliance pressures.

Should Hanwha win the contract, it would mark a significant milestone as Canada’s first purchase of a major weapons system from a non-Western supplier, underscoring the evolving dynamics of the global defence industry. The extensive efforts by South Korea to lobby for the contract reflect the country’s ambitions to rank among the world’s top defence exporters and expand its industrial base.

The final decision on the submarine contract is expected in the coming months, signaling a transformative shift in Canada’s naval capabilities and defence industrial strategy.