Antonio Giovinazzi, Alfa Romeo, Circuit de Catalunya, 2020

F1 budget cap to fall again in 2022 and 2023

2021 F1 season

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A reduction in the Formula 1 budget cap for 2021 will be just the first step in an incremental fall in spending levels over at least the next three seasons.

The cap, which was originally set at $175 million with exceptions for its introduction in 2021, is now being pitched at a lower level of $145 million. The reduced figure is yet to be formally signed off.

Formula 1 intends to reduce the cap further over the next two seasons. A ‘glide path’ will see the limit fall to $140 million in 2022 and $135 million the year after.

The level at which the cap should be set has been a focus of disagreement between teams. Ferrari indicated it would consider racing in other series if the level fell below $145 million in 2021. However McLaren have called for a lower cap of $100 million.

Guenther Steiner, team principal of Haas, one of F1’s lowest-spending teams, told RaceFans he understands why the lower limit is not acceptable for the top teams.

“I think 100 is very difficult for the big teams,” he said. “We need to be respectful as well of what they are doing.

“But on the other side I think at the moment the president of the FIA have go a good understanding where the budget cap needs to be to suit everybody. Their decision will be based on facts and not on politicking and on biased opinions.

“So I think we’re getting there. We are not there yet, so I don’t want to sing glory too early.”

Others, such as Red Bull team principal Christian Horner, have this week question whether the spending limit can be enforced at all.

How long will F1 feel the effects of the global pandemic? Read Dieter Rencken’s analysis in his new RacingLines column today on RaceFans

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Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

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18 comments on “F1 budget cap to fall again in 2022 and 2023”

  1. Good, i hope they agree to bring it gradually down to a 100 million. That feels like a nice and round number. And let’s not forget that teams can still spend almost a hundred million on top of that, since driver salaries, the renumeration of guys like Horner, Wolf, probably Newey etc aren’t included in the sum, much like marketing isn’t as well as other exceptions.

    And it is still at least 5-7 times what other motorsport teams spend on a season too.

    1. Nice round number? Whats the basis apart from it sounds nice.

      Tell that to the hundreds of people that will lose their jobs. The theory that people will move from top teams to mid to low grid teams doesnt make any sense. Ferarri mechanics and engineers won’t relocate to England or Switzerland. There are real livelihoods at stake here and we should not forget that.

      1. In a certain way, I find the realization that F1 staff numbers will be reduced, a bit disturbing. It is obvious and predictable.
        Staff reduction as a result of a meaningful budget cap is as simple as A+B =C. If you artificially limit the size of C, then either A, B or a combination, will NEED to be reduced. And yes, this translates into Italian and German.
        Impending staff reductions resulting from a budget cap are, or should be, old news. The question is who, where and when, but the inevitability of it should be no surprise. Especially here.
        Bad news … a number of brilliant and skilled people will be let go. Very unfortunate.
        Good news … and I appreciate that this won’t cure much for those affected. The result, British, Italian, Swiss industry stands to gain some awesome talent and expertise.
        Like the Vitality Effect at GE, Jack Welch era, the 10% of management staff he tossed aside every year were sought after by other industries recognizing them as 10% of the best of the best.
        We should see some of the same for those loosing out in the F1 Budget Cap process.

      2. How many will lose their jobs if teams shut down completely?
        How many will lose their jobs if F1 is crippled by a lack of competitors and competition?

        And there doesn’t actually need to be any staffing reduction – they could negotiate pay cuts and/or spend less on other factors. It’s a budget, and they can choose to spend it however they like.

  2. The problem is that what are manufacturers in F1 for? We know Renault, Honda, Mercedes and Ferrari use it to sell cars and showcase their innovations. If the cap, in conjunction with lower R&D options, turns into another spec series why bother? I’m all for them finding cheaper ways to race but you have to be careful not to kill the very thing that makes F1 different. Ultimately i see F1 and Formula E merging in any case.

    1. ColdFly (@)
      6th May 2020, 13:18

      Those big names are in it more for the marketing exposure than for the derived innovations. And either way, they can leave any moment when that interest wanes.

      F1 needs 10-13 teams which are in it for the racing and who can turn a profit. If the racing becomes less interesting for them one day, they will sell the team as a ‘going concern’ (profitable) rather than just close shop.
      Therefore profitability is very important. A fairer revenue distribution, as well as a budget cap, will enable that.

      1. F1 decided to go ultra advanced on the engines, if you now lose a couple of manufacturers no independent can build a hybrid engine, a V8 or V10 no problem. As another person mentioned you need a way to let the sport be viable for independents and retain manufacturers. If become profit orientated you run the risk that people turn up just to take a slice of the pie rather than be competitive (NFL had this problem and had to bring in a minimum spend to balance the overall cap limit) in other words if you want the benefit of being in the sport you have to pay. This is why i think the customer car route isn’t a bad idea on paper but does imply you can buy a car cheap, do no development and demand equal pay. I can imagine even people like Racing Point and Williams will balk at that.

        1. In the old days the small independent teams didn’t build engines, they just got a Ford DFV. And won races and championships. Now, the engine makers impose ludicrous restrictions on what their customers can do. If you or I go out and buy a car and decide to have it re-mapped, the manufacturer cannot stop me from doing so – but in F1 they can and do.
          The ‘influence’ an engine maker has over its customers operations is the problem.

        2. And yet, if it really were so easy to build those V8’s and V10’s, why did all of the independent manufacturers disappear from the sport during that era?

          Hart collapsed altogether, being a victim of the collapse of Arrows; Judd, meanwhile, left the sport as an independent manufacturer in 1992, though they did linger on until 1997 that as Yamaha’s engine builder (i.e. only being able to stay on in partnership with a manufacturer).

          Motori Moderni’s brief partnership with Subaru was an unmitigated disaster that collapsed after a handful of races and saw Motori Moderni sink without a trace. Ilmor, meanwhile, only lasted a couple of years as an independent before being backed by, and eventually absorbed into, Mercedes.

          As for Cosworth, almost all of their engine projects were paid for by Ford – you also can’t really call them an independent manufacturer in the 1990s and early 2000s either, as they were owned by Ford in that period.

          The only engine they built as an independent team was the CA2006 – although even that is debatable, because the initial development took place whilst Ford still owned Cosworth and was initially paid for by Ford. It was also dropped by Williams – their sole client – at the end of that season, and could only be brought back into F1 by the FIA forcing the new entrants in 2010 to have to use it.

          All of those teams then spent the rest of their time in F1 trying to get rid of that engine, whilst Cosworth itself was hitting financial problems in that era in part because they were having to support the development of those V8 engines – both of which highlight that those V8 engines weren’t actually a sustainable option for Cosworth.

      2. I would add to that, that having a lower budget will most likely make it easier to convince boards to stay in. Currently committing to F1 means pooring an endless amount of money into the hole, with budget caps, that amount becomes a lot easier to plan and budget for @coldfly and “Ed”.

        It won’t take away a bit from the innovation – just think about how much innovation can be don for an amount that is still clearly north of a 100 million a year.

        1. If the budget is the problem we know teams in the past lime Minardi/Marussia coped on £30m a year why not say cap it at £15m so that the small teams get a fair crack?

          1. Ed, Marussia relied quite heavily on Nikolai Fomenko writing off the debts that the company owed back to him – I believe that he has previously indicated that he wrote off more than $200 million in debt that Marussia owed him and was never going to be able to pay back.

            It might be the case that Marussia’s income might have been £30 million, but their expenditure was significantly more than that – their business model wasn’t sustainable in the long term.

            As for Minardi, bear in mind that you are talking about figures which are about 20 years old – a sum of $50 million back in 2000 equates to closer to $75 million today when you account for inflation. It is also worth bearing in mind that Minardi was more of an exception that the rule – if you look at the teams which had comparable budgets, Arrows and Prost went bankrupt in the early 2000s, whilst Jordan eventually sold his team off as being unsustainable even with a higher income than Minardi: even Minardi couldn’t survive on that low a budget indefinitely.

          2. This still misses the point, if the back of the grid teams aren’t getting a fair crack at F1 the budget needs to be set so that they can compete. So you need to work out total revenue given to the teams equally divided between them. Once this is done the cap has to then be below this figure, this way all teams make a profit. But here’s the rub, by introducing standard parts and heavily restricted development avenues there’s no money left in the cap to spend on extra development. But if you raise the cap to let development take place whats a fair figure? If we know the back of the grid teams aren’t coping now financially then raising the cap doesn’t help. So if people are concerned that all teams need to be able to win and compete the figure for the cap needs to be set at a level that the poorest team on the grid can cope with.

  3. The budget cap should be permanently tied to overall revenues by Formula One Group.

    Last year total revenus were 2.022 billion. I think teams share half of that which is 1.011 billion. Formula One Group should make an expectation on income before the year, and let’s say cost cap should be 120% of the teams’ share divided by number of teams.

    In above example the budget cap would be 121,32 million.

    1. no @bleu. The budget cap is what can be spent on racing (well, if you add the driver salaries, the team management renumerations and everything else excluded from the cap).

      But the teams will get money that goes up with the sport earning more. So overall, this opens up the perspective of making a profit. And that will make running a successfull F1 team a lot easier and more sustainable

  4. To be honest, I don’t really believe that a budget cap will lead to F1 becoming essentially a spec series. Over the past few seasons, Mercedes, Ferrari and Red Bull have been investing similar amounts of money on the areas that fall under the budget cap, and yet I don’t see anyone suggesting that all three of those cars are basically a spec-car. Or in the midfield, there are a large group of teams who tend to have budgets which are fairly similar, but that doesn’t make F1 a spec-series. And they won’t really be affected much by the budget cap regardless, since they spend below the threshold anyways. Introducing some standard parts can perhaps push F1 more towards a spec-car series, but the main performance differentiators will still remain, such as the power units, chassis, suspension etc. Not to mention with financial restrictions in place, it is less necessary for sporting and technical restrictions to close the field up.

    1. @mashiat The concern isn’t that teh budget cap in & by itself will turn F1 into a more spec series. The concern is that the budget cap along with tighter restrictions on development, The faster closing of things Liberty deem as loop-holes as well as them saying they will shut off areas of development they don’t like much faster (Thus making teams less likely to spend the more limited budgets on clever ideas) will start to make F1 more spec.

      They are also already talking of making some parts spec simply because ‘Fans can’t see them’ or because they think ‘Fans don’t care’.

      I have argued before that a budget cap should come with less restrictions & more open development rather than making things more restrictive because I feel that if you make things too restrictive you begin to lose the essence of F1 which is clever thinking, development, technology & performance. It’s meant to be the pinnacle of open wheel racing, That is a big part of what sets it above other categories & what to many makes it more interesting/exciting than things like Indycar or even Formula E (Which would be far more interesting if it wasn’t spec outside of the motors).

      I just really worry that they are going to end up watering things down so far that it no longer resembles F1 & loses that appeal that has for decades elevated it above everything else as the pinnacle of the sport.

    2. @mashiat even some of those parts you think will be performance differentiators are likely to be at least partially standardised.

      For example, there have been proposals to standardise the mechanical braking systems of the cars, with standardised brake discs, pads and calipers. There was also talk of standardised front and side impact crash structures – since those structures, in turn, are attached to the chassis itself, that implies that at least part of the chassis will have to have a standardised layout in order to fit around those structures.

      You also repeat the mantra that “Not to mention with financial restrictions in place, it is less necessary for sporting and technical restrictions to close the field up.” – however, that is contradicted by the attitude that Liberty Media have exhibited towards the negotiations on the budget cap.

      They have made it clear that, to them, technical restrictions are the mechanisms by which the budget cap is being enforced – there is no intention, now or for the foreseeable future, for those restrictions to ever be lifted.

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