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German bid for Canadian $40B sub project takes hit as Volkswagen denies offset

Published: 12 Mar. 2026, 17:56 Updated: 12 Mar. 2026, 18:10

CHO YONG-JUN
[email protected]

Volkswagen Group CEO Oliver Blume speaks to journalists on the press and media day of the IAA auto show in Munich, Germany, September 8, 2025. [REUTERS/YONHAP]

The tide in the bidding war for Canada's $40 billion submarine project appeared to take a turn this week as Volkswagen officially refused to attach itself to Germany's efforts to claim the contract, potentially dealing a blow to the European country's proposal.

During the automaker’s fourth quarter earnings call in Wolfsburg on Tuesday, Volkswagen Group CEO Oliver Blume was asked directly whether the German government sought more investment in Canada by Volkswagen to boost TKMS’s bid.

"We are not related to or couple our activities to any other business deals," the CEO said, according to Investing’s transcript of the earnings call. "What that means is we look at what makes sense for us, for Volkswagen."

Instead, the CEO said “other European manufacturers” could be involved in making Germany’s deal more attractive.

The comment comes as the German automaker missed market expectations, with its operating profit last year plunging 53.5 percent on year. Affected by the tariffs imposed by U.S. President Donald Trump and falling sales in China, Volkswagen said it will cut 50,000 jobs by 2030.

Nevertheless, the automaker's move to openly distance itself from the submarine bid is a considerable blow to Germany.

Canada has been explicitly signaling that its Canadian Patrol Submarine Project, worth around 60 billion Canadian dollars, is not just about replacing the country's aging submarine fleets but an opportunity to bring in massive amounts of foreign investment to revitalize its industry and employment through aggressive offset investment packages — a trade element under which a winning bidder is expected to offer industrial benefits.

Canadian Industry Minister Mélanie Joly had bluntly said that the country “fundamentally wants a car plant” included in the submarine deal.

Germany’s TKMS, formerly known as ThyssenKrupp Marine Systems, is in a fierce race with Korea’s Hanwha Ocean to win the massive bid.

Hanwha Ocean's KSS-III Batch II submarine [HANWHA OCEAN]

Both countries have been inking different memorandums of understanding over the past months in a bid to gain favor with Ottawa, including promises to purchase Canadian steel and crude oil and co-develop AI models and satellites.

While the German bid may have been dealt a blow with Volkswagen distancing itself from TKMS's bid, Korea, too, has no clear answer to Canada's push for a car factory.

But with the German automotive giant pulling out, the ball is in Hyundai Motor Group's court. Canada directly requested the involvement of Korea's largest automaker in the bid to sweeten the deal. Reports that Ottawa asked Korean authorities to encourage Hyundai to establish an automotive manufacturing plant in Canada surfaced in January, followed by rumors that Volkswagen had offered an EV battery plant, which was later denied.

Hyundai, which just recently completed its new plant in Georgia and has also been hit with U.S. tariffs, is instead known to have promised to build a hydrogen infrastructure in the country, which includes hydrogen production, storage, charging and effective energy use.

Hyundai Motor Group Metaplant America (HMGMA), Hyundai Motor Group’s U.S. electric vehicle production base, is seen in Georgia on March 30, 2025. [HYUNDAI MOTOR GROUP]

BY CHO YONG-JUN [[email protected]]