Canada has again pressed Korea, which has jumped into the bid for a patrol submarine project worth up to 60 trillion won, to make an "automobile investment." In response, on top of Hanwha Group's all-out investment cards, Hyundai Motor Group has presented cooperation plans for a "hydrogen ecosystem." Canada is showing a positive reaction to Hyundai Motor Group's plans for now. But with Germany, a rival, mounting a full-court press by fronting a Volkswagen battery plant, Korea also urgently needs a concrete investment roadmap.
On the 2nd, Steven MacKinnon, Canada's minister of public services and procurement, visited the Hanwha Ocean Geoje plant and said, "The key to the submarine bid is who can provide Canada with the best economic opportunity," adding, "Korea and Germany are both automobile manufacturing countries, and if we cooperate in such fields, it could expand beyond defense into greater economic cooperation." He reaffirmed that one of the key evaluation criteria for the Combat Patrol Submarine Project (CPSP) bid is each country's investment in the automobile sector.
Hanwha, a direct beneficiary of the submarine bid, has launched an all-out offensive by mobilizing groupwide capabilities. On the 26th of last month in Toronto, Canada, Hanwha Ocean and Hanwha Systems signed memorandums of understanding (MOUs) for strategic investment and industrial cooperation with local companies in five fields, including steel, artificial intelligence (AI), and space, burning their bridges behind them.
In particular, Hanwha Ocean joined hands with Algoma Steel, Canada's largest steelmaker, and pledged a direct investment of about 345 million Canadian dollars (about 366 billion won) to build local steel production facilities and expand maintenance, repair and overhaul (MRO) infrastructure for submarines. It effectively threw a mega package aimed at Canada's future industrial ecosystem as a winning move beyond defense orders. Global consulting firm KPMG analyzed that if Hanwha's industrial cooperation is carried out, it would create cumulative employment of more than 200,000 people across Canada by 2040.
◇ Hyundai Motor presents hydrogen cooperation plan… Canada gives positive review, saying it "scratched where it itched"
The view now is that Hyundai Motor Group holds the key to Canada's submarine deal. Hyundai Motor Group plans to secure Canada's support with a hydrogen ecosystem cooperation card for now. Last month, Hyundai Motor Group Chairman Chung Eui-sun personally joined the special delegation for Canada strategic economic cooperation led by presidential chief of staff Kang Hoon-sik to review the potential for cooperation with Canada across the hydrogen ecosystem.
Hyundai Motor Group has capabilities across the ecosystem, from production with water electrolysis facilities (Hyundai Motor), to storage (Hyundai Mobis), transportation (Hyundai Glovis), and utilization (Hyundai Motor, Kia, Hyundai Rotem, Hyundai Steel).
The "automobile plant" the Canadian government previously mentioned directly is virtually impossible. The market has to be big enough to absorb local production volume, but Canada lacks business viability.
According to Canadian market research firm DesRosiers, Canada's automobile sales last year were 1.9 million units and have not recovered since hitting a peak of 2.04 million units in 2017. Compared with the U.S. auto market, which exceeds 16 million units, it is only about one-eighth the size. An auto industry official said, "Existing auto plants in Canada are pulling out one after another, so new entry will not be easy."
Although Hyundai Motor Group's hydrogen ecosystem cooperation plan differs in nature from the direct investment the Canadian government is asking for, such as establishing an auto plant, some analysis says it could be a practical alternative given the local urgency to strengthen energy security and restructure industry.
In fact, some on the Canadian side are said to have given a positive assessment of Korea's cooperation plan, saying it "scratched where it itched." Canada has been struggling because its steel industry is facing supply disruptions due to tensions with the United States, while it urgently needs independent energy development but lacks investment capacity and technical experience. Government and industry observers say the competition with Germany for the order is neck-and-neck so far.
◇ Germany gains early edge with "battery plant"… Korea weighs practical investment roadmap
However, the fact that Germany is seizing momentum in the bidding by pushing Volkswagen's battery plant is a significant burden for Korea. Separate from this submarine bid, Volkswagen is already building a large-scale battery cell plant in Ontario, Canada. The Canadian government is citing this as a core contribution by Germany and is pressuring Korea to make a commensurate investment.
With either Korea or Germany bound to fail in the bid, the need to make large-scale investment pledges preemptively is also a concern for Korean industry. An industry official said, "Rather than mentioning an auto plant plan that can promise a specific number of jobs to Canada, Germany is watching Korea's moves and waging a meticulous strategic campaign."
As the Canadian government has presented automobiles as a clear guideline for the core link of industrial cooperation, the Korean government is expected to fine-tune an investment package plan.
An industry official said, "While maintaining the hydrogen ecosystem narrative, the key will be how to make concrete the job and investment figures Canada is asking for," adding, "An approach that presents a more detailed roadmap than Germany is needed, so corporations and the government will conduct in-depth discussions on how direct investment can actually be made and finalize an investment plan."