Canada picks Germany’s TKMS for multibillion-dollar submarine deal

Canada has selected German shipbuilder Thyssenkrupp Marine Systems (TKMS) as its preferred bidder to build a new fleet of submarines, in a multibillion-dollar defence programme that is expected to deepen Ottawa’s strategic ties with Europe at a time of strained relations with the United States.

Speaking on Monday, July 6, at a naval base in Halifax, Nova Scotia, on the eve of the NATO summit in Ankara, Prime Minister Mark Carney said TKMS had been chosen to supply 12 diesel-powered, 3,000-tonne submarines capable of operating in Arctic conditions.

“This procurement will be the largest in Canadian history and that, by design, this process will have, far and away, the greatest economic impact of any defence investment right across Canada,” Carney said. “The expectation is we have four submarines by 2034,” he added.

Carney said that if negotiations with TKMS fail, Canada would turn to the alternative bidder, South Korea’s Hanwha.
“This was a difficult, close decision between two highly qualified suppliers. Both the TKMS and Hanwha platforms met the capabilities of the Royal Canadian Navy, and both put forward strong proposals,” he said.

The submarine programme forms a central pillar of Canada’s largest military modernisation effort since the Second World War. It comes amid tensions with the United States, where President Donald Trump has threatened to scale back Washington’s security guarantees to NATO allies and criticised Canada for historically underspending on defence.

Trump has argued that Canada has failed to meet NATO’s 2% of GDP defence spending target and has suggested that, given U.S. protection, Canada could become the 51st U.S. state.

Carney’s government has pledged to increase defence spending to 5% of GDP by 2035, after reaching the 2% threshold last year. Ottawa is also reviewing a 2023 agreement to purchase 88 F-35 fighter jets from the United States, with the possibility of switching to Sweden’s Saab Gripen under consideration.

The contract decision follows a year of intense lobbying by South Korea’s Hanwha and a German-Norwegian consortium led by a TKMS subsidiary. The German bid centred on the Type 212CD submarine, jointly developed with Norway, and emphasised interoperability within NATO.

The proposal included extensive cooperation with European partners, such as shared logistics and maintenance, joint training exercises, shipbuilding collaboration and potential crew exchanges.

TKMS chief executive Oliver Burkhard welcomed the selection, calling it the largest single order in the company’s history. “It comes a clear promise: we will deliver,” he said.

German Chancellor Friedrich Merz said the deal sent “a strong signal of transatlantic and European co-operation in the defence industry,” adding: “This is a major strategic project that will bind Canada, Germany and Norway together for decades.”

A senior German official, speaking ahead of the announcement, said the agreement would “bind Canada to us for decades” and provide “a very good starting point for strategic co-operation.”

The deal marks a shift in Berlin’s approach, with Merz and Defence Minister Boris Pistorius offering unusually strong political backing for the bid. Germany has increasingly sought a leading role in European defence amid the war in Ukraine and a perceived reduction in U.S. engagement, committing hundreds of billions of euros to military spending.

Despite the outcome, analysts said the decision was closely contested. Richard Shimooka, a defence researcher at the Macdonald-Laurier Institute in Ottawa, said the European orientation of the Canadian government likely influenced the result but raised concerns over cost and delivery timelines.

“It will be more costly and Germany’s production capacity is highly constrained, while South Korea can deliver much more quickly and efficiently,” he said.

Existing contracts suggest the submarines could cost more than €1 billion ($1.1 billion) per vessel, though Burkhard said it was too early to provide a “meaningful” estimate of the overall contract value. He noted that including lifecycle support over 40 years would significantly increase total costs, adding that “the numbers become very large very quickly.”

South Korean officials and analysts acknowledged the setback but emphasised the competitiveness of their bid. Patrick Han of SK Securities in Seoul said: “The fact that Korea is now competing head-to-head with Germany for national submarine programmes is itself validation of how far the industry has come.”

Canadian officials privately indicated that while South Korea’s proposal was technically strong, the German partnership offered greater long-term strategic alignment, particularly through NATO integration and political cohesion.

By Tamilla Hasanova