The Canadian government announced that it has selected Germany’s ThyssenKrupp Marine Systems (TKMS) as the preferred bidder for its next-generation submarine program (CPSP). South Korea’s Hanwha Ocean (042660.KS) fell short in the final round despite an aggressive advertising campaign, faster delivery schedules, and a large-scale economic cooperation proposal.
Canadian Prime Minister Mark Carney announced Saturday that TKMS had been selected as the final preferred bidder for the CPSP. Carney made the official announcement in Halifax, Nova Scotia, an eastern port city that is home to a major Canadian naval base.
The CPSP is a project to replace four aging Victoria-class submarines with up to 12 new diesel submarines. Including construction and decades of maintenance, repair and overhaul (MRO), the total project cost approaches 60 trillion won, making it a mega-scale project.
The Canadian government said it selected TKMS’s proposal after a comprehensive evaluation based on four criteria: submarine performance (20%), maintenance and logistics support (50%), price (15%), and economic and strategic cooperation (15%). With the maintenance system, including logistics support, carrying the highest weight, analysts said interoperability with NATO allies Germany and Norway, as well as access to existing maintenance infrastructure in Europe, India and Singapore, worked as strengths.
The decision is also read as a political signal that Canada chose to strengthen its traditional bonds with European allies. Germany had characterized the project as part of strategic cooperation against the Russian threat. In fact, when news emerged that Carney would officially announce the CPSP preferred bidder selection before departing for Turkey to attend the NATO summit, observers suggested TKMS would be chosen. The interpretation was that there was no reason to announce a decision rejecting Germany, a NATO ally, right before the summit.
In the bidding competition, TKMS also emphasized that Norway would share the design of its own submarine facilities with Canada to support the establishment of maintenance facilities on both coasts.
TKMS proposed to deliver four submarines by 2036 and promised 160 billion dollars (Canadian dollars, hereafter) in economic activity, 86 billion dollars in GDP contribution, and the creation of more than 650,000 jobs over the entire project period.
In response, Hanwha presented an aggressive schedule, offering to deliver its first submarine in 2032, four by 2035, and 12 by 2043. Hanwha waged an all-out battle to the end with an economic cooperation proposal expected to contribute more than 25,000 jobs annually and more than 120 billion dollars in GDP. The proposal added automotive industry support measures, including the establishment of a joint venture with the Automotive Parts Manufacturers’ Association of Canada (APMA) for local production of armored vehicles such as the K9 self-propelled howitzer, and “Project Beaver” to build hydrogen truck infrastructure. However, it could not overturn the Canadian government’s final judgment, which prioritized the maintenance system and NATO interoperability.
As a result, Hanwha will have to postpone the symbolic achievement of entering the NATO market to a future opportunity. Still, some in the industry say that the aggressive marketing and rapid delivery strategy Hanwha demonstrated during this bidding process could be evaluated as an effective competitive edge in other countries’ submarine procurement projects, such as Saudi Arabia and Greece.