Commentary on the future strategy of Formula 1

Formula 1 is developing splendidly in the midst of the Corona crisis. Liberty Media turns it into a business model in which, unlike in the past, manufacturers can also lose. Because it is no longer just dollar bills that are burned, but even income is waving with the budget ceilings.

There was great concern that Corona would not only hit motorsport hard, but might even knock it out. The opposite has happened so far. The parties moved together, drew up contingency plans and kept operations running. Let's hope it stays that way despite new virus variants.

Until then, let's look at what was. A lot has happened in Formula 1 since March 2020. The budget cap for chassis development was lowered from the planned $175 to $145 million. In an emergency, all parties suddenly agreed that less is more in this case. Some wanted even less, but a compromise that was acceptable to everyone was agreed. The cap will gradually fall further over the next two years. First to 140 million, then to 135 million in 2023.

This means that the top teams have to turn their operations upside down and brush them up for efficiency. They groan, but at the same time say that the cost cap was the best thing that could have happened to them.

Formula 1 on all channels

With an emergency calendar, Formula 1 had made losses, but kept them bearable. With 17 races you redeemed the so important income from the TV broadcasts. It's booming more than ever this season: Mercedes and Red Bull are competing at the highest level and are banging on about it every week. Lewis Hamilton and Max Verstappen drive brutally well, infighting every other race. With Ferrari and McLaren, two dinosaurs are fighting for third place. This is how good stories are made.

Formula 1 is now being told not only on the old platforms, but also on social media. You can think what you want about that. But a young audience can be attracted via Twitter and YouTube. Just like with e-sports. "We want to use it to attract people who will later race, become engineers or marshals," says F1 boss Stefano Domenicali. The Netflix documentary "Drive to survive" may be artificial in some places, but it has brought many new fans to the premier class. Now Formula 1 has to ensure that they stay with it in the long term.

Whether young or old: The fans are hot for Formula 1. This was last seen in the USA, Mexico and Brazil. With a calendar of 22 Grands Prix, this makes the cash registers ring. In 2022 there will be 23 races. There were inquiries for more than 30. That's bad for traditional GPs like Germany because there are no more discounts. Formula 1 is a business, Liberty wants to make money from it.At the same time, the rights holders should find a balance between tradition and new race locations.

Bridge for the manufacturers

With new cars, racing could become even more balanced in the future. At least the rules were written for it. Various teams have heard that it might not work out in the first year because one might have been smarter than the other. Because the top teams still have the best tools like wind tunnels and driving simulators. Your structures in the technology office have grown. You manage to use the limited development capacity more efficiently. But because the rules are written so restrictively, the teams are likely to converge over the years. And then the Verstappens, Leclercs, Russells, Norris and Co. could drive against each other in different cars.

The planned upper limit for the engines makes the costs even more transparent. Mercedes is already in the black with the racing team and wants to do that next year, including the engine division. The big teams could soon be worth billions. Even the little ones are likely to rise in value to hundreds of millions. Everyone has the opportunity to generate profits. About sponsors, about the prize money distributed. In this way, Liberty Media, in cooperation with the FIA, creates a system like in US sport. Thanks to the budget cap, everyone could one day compete for podium places or even victories. Losing becomes more bearable thanks to the prospect of being in the black – even for large manufacturers.

The topic of sustainability is high on the agenda of the makers. The premier class wants to be CO2-neutral by 2030. For the 2019 season, F1 put its emissions at a CO2 equivalent of 256,551 tonnes. For comparison: According to FIFA, total emissions of almost 2.2 million tons of CO2 were calculated for the 2018 World Cup in Russia.

The new drive from 2026 with an increased proportion of electricity and 100 percent synthetic fuels (too late for some) builds a bridge for the manufacturers involved. And it attracts new players like Porsche and Audi. Increased electrical power means increased learning effect. An existing fleet can be made cleaner with synthetic fuel – in markets where electromobility will not make a breakthrough in the foreseeable future.

An exclusive circle

More than a billion cars are on the road worldwide with combustion engines. The number alone makes it clear that a second branch will be needed in addition to Elektro. Even if it has to be said that production facilities first have to be set up and the industry does not yet see a real business model in e- or bio-fuels. Only a small percentage could actually be cared for in the beginning. Sports car for example. On the other hand, e-charging stations must first be built across the board. And without green electricity, the e-car is useless.

Ten teams belong to the exclusive Formula 1 circle.You will benefit from increasing sales if Corona does not interfere. Newcomers would have to pay $200 million. This increases the value of the established, but is considered a point of criticism: How are new teams supposed to get into Formula 1? Especially private? New teams, which are actually needed so that talented young drivers, such as Oscar Piastri, don't end up on the bench for a year if they first win Formula 3 and (probably) Formula 2 the following year.

The F1 management counters: A private team like Andretti would have been able to put more than 400 million on the table for Sauber. And it is said that there are some interested parties. The makers deliberately position Formula 1 as a "circle of excellence". According to the rules, two teams could still join, but they must have Champions League format.


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