Canada is using a military contract to extract economic commitments from foreign governments, with Germany the latest nation to signal interest in expanding its automotive presence north of the border.
Katherina Reiche, Federal Minister for Economic Affairs and Energy of Europe’s largest automotive market, met with senior Canadian cabinet officials in Ottawa on Monday and described Prime Minister Mark Carney’s auto sector strategy as “very attractive.”
“Our car industry is willing to invest here, because we will find good conditions here,” Reiche told the outlet Globe and Mail. “It’s more than just talking. We are looking into numbers, into details.”
The discussions come as Ottawa turns a fierce international competition for a naval contract into a broader negotiating tool — demanding that bidding nations commit to civilian investments as a condition of winning the deal.
Submarines x Automobiles
Two consortiums are vying to build a dozen attack submarines for the Royal Canadian Navy: South Korea’s Hanwha Ocean and a German-Norwegian partnership anchored by Thyssenkrupp Marine Systems.
The winning bidder will secure one of the largest defense contracts in Canadian history, valued at approximately $40 billion, as reported by FT on Monday.
The vessels — diesel-electric submarines designed to patrol Arctic waters — represent the centerpiece of Canada’s most ambitious military modernization effort since World War II.
Final proposals are expected in March.
Ottawa is pressing both Germany and South Korea to pledge investments in Canadian manufacturing, particularly in the auto sector, as part of their bids.
US-Canada Tensions
Trade relations with the US have deteriorated sharply under President Donald Trump, who has imposed tariffs on Canadian goods while suggesting that the nation should become America’s 51st state.
Trump threatened Monday to block the opening of a new bridge connecting the United States and Canada, escalating tensions between both countries.
The US President said the US should own “at least half” of the Gordie Howe International Bridge, which is still under construction and will link Ontario with Michigan.
Despite saying in mid-January that he endorsed the tariff agreement with China, Trump criticized it days later, warning Carney about Canada’s openness to the world’s second largest economy.
About 500 GM workers were laid off by the end of January after the Detroit automaker cut one of the three production shifts at the Oshawa plant.
Over the weekend, Canada’s opposition Conservatives urged the federal government to cut taxes on severance packages for GM‘s workers affected.
Carney’s Auto Ambitions
Carney laid out his vision for Canada’s automotive future last week, pledging to transform the country into a manufacturing hub for next-generation vehicles.
On X, the PM said the Auto plan will enable Canadian workers to “build the cars of the future and sell them to the world.”
Carney invoked Canada’s industrial heritage, citing Henry Seth Taylor — credited with building the country’s first automobile — as well as Ford‘s early Model T assembly lines and Canada’s emergence as the world’s second-largest vehicle manufacturer during the war effort of the 1940s.
The government has established a joint task force with Ontario to protect auto jobs amid US tariff threats and is reviewing existing EV mandates.
Global Courtship
Germany joins a growing list of nations engaged in auto sector discussions with Ottawa.
Industry Minister Mélanie Joly revealed Friday that Canada is exploring joint ventures between Chinese EV manufacturers and domestic parts suppliers.
“We believe that these great Canadian champions can partner with Chinese EV companies to make a Canadian-Chinese car to export it around the world,” Joly said.
The Canadian firm Magna — one of the potential partners — already produces XPeng’s G6 crossover at its Austrian contract manufacturing plant and began assembling the P7+ sedan in January.
Joly said she has held meetings with executives from Hyundai, Volkswagen, BYD, and Chery, and that the government is in “active conversations” with QNX, the autonomous driving software firm owned by BlackBerry.
Canada reached last month a trade agreement allowing up to 49,000 Chinese-made EVs into the country annually at a 6.1% tariff — a sharp reduction from the 100% duty imposed in 2024.
More than half of those imports are expected to carry price tags below $35,000 within five years, according to the Government.
Hyundai Motor Group chairman Chung Euisun traveled to Ottawa last month alongside senior government officials, with South Korea signing a memorandum of understanding committing to work with Canada on EV, battery, and hydrogen vehicle manufacturing.
German Footprint
Volkswagen has already committed to building a battery cell plant in St. Thomas, Ontario, through its PowerCo division.
Reiche declined to specify whether additional German investment would flow through that project or involve other automakers.
Germany’s three largest carmakers — Volkswagen, BMW, and Mercedes-Benz — all operate plants in the United States but have no vehicle assembly facilities in Canada.
Beyond Automobiles
Reiche’s meetings in Ottawa extended well beyond the auto sector.
She met with Joly, Energy and Natural Resources Minister Tim Hodgson, and Trade Minister Dominic LeBlanc to discuss infrastructure projects, critical minerals, and energy cooperation.
Germany expressed interest in long-term contracts for Canadian liquified natural gas and signaled openness to investing in port facilities, including the northern hub of Churchill, Manitoba.
Berlin has already backed several Canadian critical mineral projects and may expand its equity stakes, Reiche said.
