Canada taps Germany's TKMS for submarines ahead of NATO summit

OTTAWA — Canada has selected Germany's Thyssenkrupp Marine Systems (TKMS) to build up to 12 submarines for the Royal Canadian Navy, strengthening defense ties with Europe ahead of a NATO leaders' summit focused on increased military spending.

TKMS, which is majority-owned by German conglomerate Thyssenkrupp, was chosen over South Korea's Hanwha Ocean after a competitive bidding process. Canadian Prime Minister Mark Carney described the procurement as the largest defense purchase in the country's history, although he did not disclose the cost.

"In a more dangerous and divided world, Canada must do more to defend ourselves, secure our sovereignty, and support our allies," Carney said at a news conference in Halifax, Nova Scotia, before traveling to the NATO summit in Turkey.

The Canadian government will now begin negotiations with TKMS for the submarine deal. The decision comes as Canada faces pressure from the United States and other NATO allies to increase defense spending. Ottawa has said it reached NATO's target of spending 2% of gross domestic product on defense earlier than expected, while alliance members have committed to raising defense and security-related investments to 5% of GDP by 2035.

Canada, which has the world's longest coastline, currently operates only one active submarine, highlighting the need to expand and modernize its naval capabilities.

"This was a difficult, close decision between two highly qualified suppliers," Carney said.

TKMS offered its Type 212CD-class submarine, a model also being developed for the Norwegian Navy through a joint program with Germany. The company said the submarine is designed for Arctic operations and is fully compatible with NATO systems, allowing for secure communication, intelligence sharing, and joint missions.

Carney said TKMS would allow Canada to receive its first four submarines earlier than initially planned by reallocating vessels from existing German and Norwegian orders. The first deliveries could arrive by 2034, ahead of the previous target of 2036. He also said the agreement would bring tens of billions of dollars in investment to Canada.

Shares of TKMS rose as much as 12.9% after the announcement, reaching their highest level in nearly four months.

Carney previously said both Germany's and South Korea's submarine proposals met Canada's naval requirements, with the final decision expected to depend partly on economic benefits. Hanwha Ocean said it made every effort to secure the contract but was unable to overcome the advantage of NATO cooperation.

Carney said choosing Germany did not reduce Canada's focus on Asia, noting that his government remains committed to expanding trade and business ties in the region.

TKMS said it hopes the 212CD submarine, which features a distinctive diamond-shaped design, a 74-meter length, and non-magnetic steel construction, will become a future NATO standard.

"This is a major strategic initiative that will bring Canada, Germany, and Norway together for decades to come," German Chancellor Friedrich Merz said.

TKMS CEO Oliver Burkhard said the submarine order would be the company's largest in history and could increase its order backlog by more than 50% once a final contract is signed. He said the agreement is expected to be completed by the end of 2026, while Carney said the deal would be finalized no later than the end of 2027. -Reporting by Caroline Stauffer, Katharine Jackson, Rachel More, Friederike Heine, Christoph Steitz and David Ljunggren; Editing by Howard Goller, Nick Zieminski and Edmund Klamann/Reuters