Key Takeaways:
- Ottawa and Seoul have signed a memorandum of understanding (MOU) to bring South Korean auto sector manufacturing and investment to Canada.
- The MOU aims to promote the manufacturing of autos, electric vehicles, battery manufacturing, and hydrogen-powered vehicles in Canada.
- South Korea is bidding for a multibillion-dollar contract to build up to 12 submarines for the Royal Canadian Navy, and the MOU is seen as a way to sweeten the deal.
- The agreement also includes cooperation in artificial intelligence, steel and cement industries, as well as nuclear power and liquefied natural gas.
- Canada is seeking to bolster its auto sector, which has been affected by U.S. tariffs and production cuts.
Introduction to the MOU
The Canadian and South Korean governments have signed a memorandum of understanding (MOU) that aims to bring South Korean auto sector manufacturing and investment to Canada. The MOU, which is non-binding, was signed by Industry Minister Mélanie Joly and her South Korean counterpart, Kim Jung-kwan, Minister of Trade, Industry and Resources. The agreement is part of South Korea’s bid to win a multibillion-dollar contract to build up to 12 submarines for the Royal Canadian Navy. The MOU pledges both sides to work together to promote the manufacturing of autos, electric vehicles, battery manufacturing, and hydrogen-powered vehicles in Canada.
The Automotive Industry in Canada
The Canadian automotive industry has been facing challenges in recent years, with U.S. tariffs and production cuts affecting the sector. Southern Ontario is home to five automakers – Ford, General Motors, Stellantis, Honda, and Toyota – but the Detroit-based companies have reduced production and laid off thousands of workers in recent years. Canada produced 1.47 million cars in 2025, which is a significant decline from the 2 million cars produced in 2017. In contrast, South Korea is one of the world’s top car-making countries, producing 4.1 million vehicles in 2025. Hyundai is the largest producer, followed by its Kia division and General Motors Korea.
South Korea’s Investment in Canada
South Korea has already made significant investments in Canada’s auto sector. LG Energy Solution, a Seoul-based company, has partnered with Stellantis to build a $5-billion battery plant in Canada. The plant, which began production in October 2025, employs around 1,100 people and is expected to increase to 2,500 by the end of the year. Additionally, Hanwha Group, a South Korean conglomerate, has signed a memorandum of understanding with Algoma Steel to build a new steel mill, pledging $275-million for the project. Hanwha has also committed to buying Algoma’s steel for the new submarine fleet, should it win the contract.
The Submarine Contract
The contract for up to 12 submarines is a significant deal, worth tens of billions of dollars. The contract is a government-to-government arrangement, and Canada has asked the South Koreans to arrange a commitment for Hyundai to establish production in Canada. The German-Norwegian bid, which includes defence contractor ThyssenKrupp Marine Systems, has also been asked to beef up Volkswagen-related auto industry production in Canada. The winning bidder will have a deep international partnership with Canada, lasting over 50 years, and worth upward of $100-billion, including acquisition, maintenance, and upkeep.
Conclusion and Future Prospects
The MOU between Canada and South Korea is a significant development in the auto sector, and it has the potential to bring new investment and jobs to Canada. The agreement also highlights the importance of cooperation between countries in the automotive industry. As Canada seeks to bolster its auto sector, the MOU with South Korea is a step in the right direction. However, the outcome of the submarine contract will be crucial in determining the future of the auto sector in Canada. If South Korea wins the contract, it is likely that Hyundai will establish production facilities in Canada, which will have a positive impact on the industry. On the other hand, if the German-Norwegian bid wins, Volkswagen may increase its production in Canada, which will also have a positive impact on the industry. Either way, the MOU is a positive development for the Canadian auto sector, and it has the potential to bring new investment and jobs to the country.
