South Korea sweetens submarine bid, will manufacture armoured vehicles in Canada if chosen

Hanwha’s K9 armoured vehicle during a tour of Hanwha’s manufacturing facility last February in Changwon, South Korea. (CTV News)

OTTAWA – Under pressure to increase economic benefits to Canadians, South Korea’s Hanwha is committing to manufacturing armoured battle vehicles in Canada if it’s awarded the lucrative contract to build the Royal Canadian Navy’s next fleet of submarines.

CTV News has learned that Hanwha has signed a partnership agreement with members of the Automotive Parts Manufacturers Association (APMA) build its K9 vehicles in Canada to meet international demand for its light tanks.

The details of the partnership are expected to be announced Wednesday in Toronto and have been confirmed by the APMA, as well as two private sector sources.

“This is 100 per cent fully contingent on us winning the subs,” a source with Hanwha told CTV News. “This venture will not go ahead if Hanwha’s KSS-III submarine is not selected for the Canadian patrol submarine project.”

The Government of Canada had asked for vehicle manufacturing in Canada to be part of its proposal.

“This partnership with APMA delivers on the request to support Canada’s automotive sector and workers in these challenging times,” the source said.

Hanwha currently has orders for hundreds of its howitzer vehicles from six NATO nations: Finland, Norway, Poland, Tukiye, Estonia and Romania.

Australia, Egypt and Vietnam have also placed orders, while Canada is also interested in purchasing 250 new armoured vehicles.

The source also said the memorandums of understanding that Hanwha will sign with the APMA could also include the manufacturing of other Hanwha weapons, such as its Chunmoo multiple launch rocket system, and other military vehicles.

“These vehicles will be fully produced in Canada, by Canadian workers, with ‘Made In Canada” parts and materials," they told CTV News.

Earlier this month, the Defence Investment Agency (DIA), which is overseeing the procurement, announced a three-week extension to the bidding process to allow Hanwha and TKMS to sweeten its bids for the submarines. CTV News reported in March that both competitors did not have auto manufacturing in their initial bids.

Appearing before the House of Commons defence committee, Doug Guzman, the chief executive for the DIA, said the competitors were told to review their strategy and “think hard about whether you have more to put on the table.”

The deadline to improve the bids ends April 29.

The Canadian Armed Forces wants to buy up to 12 new diesel-electric powered vessels. The contract, which includes more than 30 years of fleet maintenance, has an estimated value of more than $100 billion.

According to the evaluation grid obtained by CTV News, strategic and economic partnerships will account for 15 per cent of the scoring system. The submarine platform accounts for 20 per cent, while financial criteria will be weighted at 15 per cent.

How Hanwha and TKMS propose to sustain the fleet will make up 50 per cent of the evaluation criteria. It includes developing “sovereign sustainment enterprise, integrated workforce and infrastructure.”

Guzman said there is a “conscious observation of what Canadian content is in there and in what form.” He says elected officials will be kept away from the evaluation process “for their protection and for the protection of the process.”

The parliamentary committee heard that both companies have spent the past year crisscrossing the country, seeking Canadian partners to strengthen their bids.

CTV News was first to report on the possibility of South Korea manufacturing its small tanks in Canada.

In February, Stephen Fuhr, the secretary of state for defence procurement, visited Hanwha’s manufacturing plant in Changwon. The secretary also rode inside the vehicle and was part of a demonstration Hanwha put on for more than 20 Canadian defence executives who accompanied Fuhr on the trip.

After the demonstration, Glenn Copeland, Hanwha Canada’s CEO, said in an interview with CTV News that “we could bring the production line to Canada.”

Copeland pointed out that there were domestic companies capable of making the artillery and heavy duty tracks that go into the K9 Thunder.

“We’ve got the supply chain base that you can mobilize and take advantage of. It’s a function of when Canada wants to get started,” Copeland said while in Changwon.

There is precedent for Hanwha setting up a manufacturing plant outside South Korea. In 2024, the company opened a factory outside Melbourne, Australia, after Ford and Toyota shuttered their auto plants in the region. The factory took two years to build and now employs about 1,000 people.