F1 Set to Introduce $175m Cost Cap

[Paul Jeffrey]

Grand Prix teams are set to be hit with a $175m cost cap from the 2021 Formula One season.

According to reports at Motorsport.com, Formula One looks set to introduce a five-year $175m cost cap from the 2021 racing season, a compromise measure aimed at reducing the expenditure of big budget teams whilst making the sport more affordable for new and existing squads outside of the top four big hitters.

Although higher than initially expected when talk of cost cap restrictions first came into play during the Max Mosley era, should Formula One finally implement the restriction and police it accordingly, a move towards limiting the seemingly endless spending of the top teams in the sport is certainly a good thing - especially if it encourages new teams to enter the series and stand a fair chance of competing on an equal footing.

According the motorsport.com article, it is understood that the spending restriction will not apply to driver wages, marketing or engine costs, and is expected to be in place for a five year period with provisions made to increase the cap limit in line with inflation costs.

Sadly, although a step in the right direction, very few squads outside big hitters Mercedes, Ferrari and Red Bull spend as much as $175m per season. As such the initial plan, to allow teams to become profitable and allow opportunities for smaller outfits without manufacturer backing to equal the spending power of the front runners, still remains so way off into the future.

A good step in the right direction, but potentially another missed opportunity by the power brokers behind the series.

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[Mike Smith]

It's a good idea, but I wonder how this will be enforced. F1 teams have always found work-arounds, so I wonder if the teams will receive third party parts in exchange for ad space.

For example, if a new front wing is developed by a third party company (let's call it Jones, Inc.), then sells it to Mercedes for $1 in exchange for having the Jones, inc. logo on the wing of a high profile car, would that then only show as a net cost of $1 to Mercedes?

Maybe I'm way off, but my point is that F1 teams are too crafty. Surely they'll find a way around the cap.

 

[Ben Lee]

Now it will be a battle of the accountants.

 

[Ghoults]

I think it is a good step. Budget gap is the only way you can have more technical freedom. Without budget gap any freedom in technology will always turn into spending race with the big manufacturers outright winning. I was kind of skeptical about the budget gap because there is no reason why merc, red bull or ferrari would ever accept it and even if it was accepted I was expecting the limit to be much higher. Definitely 200mil+ so 175m seems very reasonable with that in mind. Only real issue with budget gaps is that it sets a limit on how much you can catch up just like the engine restrictions have helped mercedes. Enforcing budget limits is not perfect solution but it is enforceable.

 

[pgreenwo]

@BigMike8 Can you fill out my tax return this year please

 

[Celtic Pharaoh]

Here come the Mercedes C and Ferrari C teams.

I personally believe that the only real way to keep things controlled is have F1 limited to private teams so no manufacturer teams and whereby car designs are individually based while engines could be supplied by a set number of manufacturers such as Mercedes, Ferrari and Renault. This may even make it more enticing for new manufacturers to enter F1 since they wouldn't have to commit to joining F1 as a team but as an engine supplier.

That way manufacturers can still use F1 to develop engine technologies that may be transferable to their road cars while the innovation and design of the aerodynamic and chassis design is more grounded in F1.

So long as manufacturers are allowed to compete, the private teams have no chance to compete against giants like Mercedes, Ferrari and perhaps Red Bull, although I suppose technically, Red Bull is a private team so that would be hard to manage in itself.

 

[RobertR1]

It’s a lip service due to this: The figure does not include several key elements of team spending, notably driver salaries, marketing expenses and any costs associated with engines.

They’ll just move the money under different business units and spend what they need to stay ahead.

 

[Terry Rock]

"Good luck trying to enforce that."
They'll never be able to get that done...too many smart accountants at these teams.
Wasn't it rumored a few years back, that Ferrari are given $100m just for showing up?
If true, they'd only be spending $75m annually
How'd the engine supply portion be handled under that cap?

 

[Chris]

If it can be policed properly, this is a wonderful development for the Sport. This is something that has been needed for a loooong time.

 

[michelforest]

Now it will be a battle of the accountants.

Indeed. Reminds me of the old joke:

Ask an engineer how much is 2+2, and he will answer 4. Ask an accountant, and he will answer: "It depends... How much do you want it to be?"

That's especially true of a Hollywood accountant. The screenwriter for the movie "Trading Places" once sued a studio because he was promised a cut of the profits. The movie was a huge hit, yet he never saw a dime because the studio claimed that, according to their accounting department, the movie had lost money...

 

[wombat999]

Too little too late.
The big operations will simply resort to subterfuge and armies of bean counters.

 

[Nick Hill]

I'm not sure what to think, but I do believe this moves F1 a step closer to a NASCAR style model where it's all about the driver competition.

In the near/mid term, this move may prove to slow down the loss of interest in F1, but I doubt this is some kind of turning point where F1 ultimately ends up regaining it's past glory. The more likely scenario I believe is Formula E overtakes F1 in popularity/prestige (something that may sound far fetched right now, but I believe it can/will happen in relatively short order).

And, by the way, this is coming from a big F1 fan. I suffer through every Mercedes 1-2 and try to find a silver lining in every race. I am certainly not hoping for the demise of F1, I just personally believe the writing is on the wall.

 

[aphidgod]

Does anyone even care anymore?

 

[Dr. Death]

175 millions for the R&D, 175 millions donated, 175 millions for advertisement, 175 millions for the transport, 175 millions for the employee hires, oh, and what's left goes back to R&D because its already 175 millions.

But yeah, lets bring a spending limit on an already dying motorsport where people are running into financial issues.

 

[peppepino]

so ridicolous. "Real Madrid, sorry, you can't spent more then Wolverhampton next year, it's ok?" Liberty Media, go back home greengo

 

[Isaac Chavira]

I welcome this move. I have actually stopped watching F1 because it's always Hamilton, Bottas, Vettle. You already know the outcome of the race before it even starts. I know Hamilton is a good driver but let's throw him in the HAAS car or the Alfa and see how he fares.

 

[josap11]

I've never agreed with this idea, but that number is way too low.

The larger teams will start to look at letting people go because they cannot afford to do it in their budget, it will not make a difference for the smaller teams. It will hurt innovation because you can no longer afford to just try something. There are so many problems with this, what they should do is not introduce a budget cap but instead look at the distribution of prize money. It is odd that over the last number of years Ferrari has received more money then Mercedes have. This system is not working and there should be a set structure based on the constructors championship without these weird added bonuses and try that instead. A budget cap is just a really terrible idea and goes against the innovation we so desperately want to keep in F1.

If you want to cut costs, cut what they have to spend it on. A lot of the money goes into the power units and therefore maybe look at changing those to something that maybe includes a more powerful ICE and MGU-K and take away the MGU-H or even the TCs. Unintuitively, you might also try to open up the aero regs again because that would allow teams to just look at optimizing what they have instead of trying to innovate on such narrow margins which by default will be more expensive.

 

[Arkoudadis]

Reading about the changes and the hype behind 2021 season gives me the impression that 2020 will be so incredibly bad! Everyone will be throwing money towards 2021 there will be 0 changes in 2020. Its going to be 2019.5 championship basically

 

[aphidgod]

So it's going to be the 2014.6 championship? Doesn't sound much worse than the 2014.5 championship we're "enjoying" in 2019. Frankly, F1 can get ****ed as it stands right now. It's boring AF, comically predictable, stale, flat and dull. It's boring. Sad, pathetic and boring.

(And I'm a fan of F1, or at least I have been for the last 30+ years, so please spare me the "hater" pushback. I'm not a hater. I'm just honest.)

For those of you gnashing teeth and raging against this idea, though, do you actually enjoy seeing Mercedes (and to a slightly lesser extent, Ferrari) outspend everyone and buy half a decade of unchallenged success? I don't.

I'm not saying I like this plan, or even that I think it'll be effective, but I am agreeing in principle with Liberty that without some drastic changes, F1 is going to die. Just like CanAm did. When one German manufacturer outspent everyone and won every race... for 5 years running... oh god, this is starting to sound familiar.

 

[Jan Larsen]

"Good luck trying to enforce that."

Yep, should be a simple thing for an accountant to work his way around that.