Williams team principal James Vowles says F1’s budget cap disadvantages smaller teams who lack resources bigger teams already own.
F1’s financial regulations came into effect at the start of the 2021 season. The rules limit how much teams can spend on their racing activities over the course of a year. The cap was originally set at $145 million (£114 million), with reductions agreed over the following two years. This season, the cap has been reduced to $138.6 million (£109 million).Vowles, who assumed the role of team principal at Williams just prior to the start of the season, previously worked as a strategist at Mercedes during the period where they won all of their eight constructors’ championship titles and seven consecutive drivers’ championships. Speaking to RaceFans, Vowles said the introduction of the financial restrictions was fundamentally positive for all teams.
“There’s the operational budget cap, which is the number that most people know,” he told RaceFans. “That’s the $145m – which is not really $145m, it’s larger than that because there’s various corrections applied to it – that’s the number everyone thinks of the cost cap.
“That bit, I’m completely in support of. It’s a good thing. It’s why these businesses are now becoming sustainable. It’s why Formula 1’s growing the way it is. In all the time I’ve been in Formula 1, we would just spend as much as we could to be quicker. But everyone’s doing the same thing, so you just end up in this game where we’re just ratcheting up our budgets relative to each other. That is a really good decision.”
However, Vowles said his new team and others towards the back end of the grid are disadvantaged due to lacking the same resources that his former team had already bought and paid for.
“What wasn’t a good decision is we have a capital expenditure side of the cost cap,” he explained. “When I had my Mercedes hat on, unfortunately I knew what this would do which is why we were so keen on signing it up and restricting this.
“At Mercedes we had about $300 million-worth of equipment that Williams does not have. That’s locked in and no one else would ever catch that up. And even if they could, imagine how long it takes you to spend $300 million, get the money together, put it in place.
“That’s why the big teams signed up to the cost cap very quickly. And, for small teams, what it meant is that we’re fighting really with one arm behind our back by comparison.”
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Vowles has been outspoken about the limitation on smaller teams, arguing that the sport must be willing to agree to concessions if it is aiming for a “true meritocracy.”
“I’ve come from somewhere where I can have everything because I’ve got it,” he said. “It’s spent.
“I don’t [have that] here. Let me catch up. Let this be a true competition. And the sport, in all fairness to it, is responding to that and accepting that, and there will be change taking place.”
Speaking over the Canadian Grand Prix weekend, McLaren and Alpine team principals Andrea Stella and Otmar Szafnauer echoed Vowles’ sentiments on the gap between bigger and smaller teams.
“We understand where James is coming from, because McLaren is a team that has operated without infrastructure, or infrastructure at the same level as some top teams, for a long time,” said Stella. “This is the reason why we have invested, largely to be able to have a new wind tunnel and our simulator, a composite facility.
“We would welcome and we welcome a conversation about relaxing some of these limits, because we would like to further invest. We are supportive of being in a condition to spend money to be more competitive from an asset and infrastructure point of view – and this is what’s happening together with the FIA.”
Szafnauer pointed to concessions already made to teams under the financial regulations to construct new wind tunnels as an example of how the sport has already been flexible with this issue.
“I think it’s only fair that we level the playing field on infrastructure, and the tools that you fundamentally need to go Formula 1 racing,” Szafnauer said. “And that’s what we’re talking about here.
“I know we’ve done it once already for wind tunnels. So for example, Aston Martin didn’t have a state-of-the-art tunnel and we gave everyone dispensation on wind tunnels. And I think we need to do the rest on fundamental infrastructure that’s required to go Formula 1 racing, just to level the playing field.”
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asd
27th June 2023, 8:26
Wow, that’s quite a fundamental issue and difference between teams that I’ve never thought about.
Facts&Stats
27th June 2023, 9:12
This is certainly not new knowledge and I would be surprised if this is not included in the overall cost cap regulations/restrictions.
Typically CapEx is included as either:
– pay from within the cost-cap (unlikely, as it makes large investments very difficult; one cannot carry unspent cap to the next year);
– include depreciation in the cost cap (most likely, but of course the big teams argued that their existing equipment was already fully depreciated);
– charge a ‘transfer pricing’ amount to all items coming from these CapEx (difficult enough for composite parts, but becomes harder for services like windtunnel and simulator hours).
Tifoso1989 (@tifoso1989)
27th June 2023, 9:29
asd,
It’s a known issue even for the casual fans, I myself have written some comments back in 2021 about the stratospheric investments Ferrari made to upgrade its infrastructure before heading into the budget cap era. New simulator, upgrade to wind tunnel, partnership with AWS, cutting edge PU manufacturing technology…
Sikhumbuzo Khumalo
27th June 2023, 10:07
Its a critical issue as large teams have their advantages locked in (capex in yrs prior to cost cap); whereas a team like Williams which has new investors cannot spend on capital equipment to the extent they would want to. It is something which FIA has to review and possibly adjust for all teams.
Biskit Boy (@sean-p-newmanlive-co-uk)
27th June 2023, 12:16
Very true, but surely those clever people ay the FIA should have thought about this prior to the introduction of the cost cap.
F1 is like a technological arms race. To try and limit it by non-technological means seems illogical and is an anathema to me.
Ask your self the question what is the cost cap for? Equalisation of performance and affordability?
Issues like the one raised by Sam are the perfect illustration of why the cost cap was a bad idea in terms of equalization of performance. It was never going to work. Technical regulation is the only way, i.e. is the car that turns up on the grid legal or not?
Affordability? Why aren’t there more teams on the grid? Lots of reasons yes but cost is a massive factor. Is the cost cap helping here?
Esploratore (@esploratore1)
27th June 2023, 20:46
I think the cost cap helps with affordability, but yes, this is a big advantage big teams had, potentially making it even harder for other teams to compete (now AM is a big team too).
harold wilson
28th June 2023, 1:22
Cost cap was not brought in for equalisation though, that was done for affordability. The teams were spending themselves into oblivion.
Carbonized
28th June 2023, 12:25
WEC did it with regulation only and look at the result at Le Mans: a bunch of manufacturers, cars with or without wings, 4wd 2wd, ICE Hybrid, different hybrid implementation, and yet extremely close racing, a small manufacturer with 2 ICE cars withing reach of a podium, and a win for a manufacturer on their come back. No gimmicks, No financial shenanigans. Just regulation.
Qeki (@qeki)
27th June 2023, 8:59
It doesn’t matter how equal the playing field is or is made. Someone will still have something bigger
Sikhumbuzo Khumalo
27th June 2023, 10:08
That is true however those who hold ambition of being more competitive (ie Williams) – they will be of view that with additional capex spend they can improve their competitiveness as a team.
Robert Henning
27th June 2023, 12:53
No one is there just for vibes. Everyone has ambition. This is a bad take. What @qeki says is absolutely right. Even if everything was the same, some will do a better job than the others.
Darryn Smith (@darryn)
27th June 2023, 18:10
The cost cap was to preserve the big teams dominance. So it seems to be working effectively.
Nick T.
28th June 2023, 17:53
No it wasn’t. Most of the small teams knew even if the rich teams loaded up on infrastructure spending before it took effect, they’d be still be a in better position. Without the cost cap, the biggest teams would have both the infrastructure advantage + a huge edge in development spending. Let’s not forget that a number of the small to mid-sized teams do their wind tunnel work in the big team factory tunnels. So, they can make use of those facilities now, which wouldn’t be the case if the big teams had unlimited wind tunnel time.
Matthijs (@matthijs)
27th June 2023, 9:25
Sometimes I am having difficulties with English. Why is it ‘Mercedes have’ instead of ‘Mercedes has’? Mercedes is ‘a’ team, it is singular, not plural.
MichaelN
27th June 2023, 9:30
It’s an English quirk; they mix it up. Americans and others do indeed almost uniformly use the singular.
Facts&Stats
27th June 2023, 10:46
I think it’s a mistake (certainly where I’m from).
It would only be correct if written as e.g. ‘at Mercedes they have’ and referring to the various individuals or entities, or ‘Mercedes does have’ (to keep it in line with the verbs used in the quote).
Lewisham Milton
27th June 2023, 18:11
How dare you subjects call us “they”; it’s “he” or “she” to you.
gDog (@gdog)
27th June 2023, 10:46
I might be a native, but I’m definitely not an expert on the technicalities of the language! However, I think it’s because, although conceptually the Mercedes team is a singular object, it’s really a group or collection of people and objects.
Esploratore (@esploratore1)
27th June 2023, 20:47
Yes, this is what I know too.
Stephen Crowsen (@drycrust)
27th June 2023, 12:14
According to “An A to Z of English Grammar and Usage” (by Geoffrey Leech and others), under the heading of “Have” (Page 189, it talks for 5 pages about have, had, and has), “has” is used with he, she, it, or a Singular Noun Phrase as subject; while “have” is used with I, we, you, they, or a Plural Noun Phrase as subject. If you look at what James actually said, it was “At Mercedes we had about $300 million-worth of equipment that Williams does not have.” “Had” is used to indicate the past, e.g. a past participle (no, got no idea what a past participle is), so I believe James was correct in saying “At Mercedes we had … ” because he did work there but no longer does. My guess for the reason why “had” became “have” in the headline, and is because Mercedes is considered to be “they”.
Matthijs (@matthijs)
27th June 2023, 14:01
Thanks @drycrust
Indeed, it is very consistent on this site (and also on others I believe) that teams are identified as plural, so ‘the team have’ instead of ‘the team has’ and ‘the team don’t’ instead of ‘the team doesn’t’. Since it is done consequently, it must be imbedded in the language rather than a personal preference by the author.
asd
27th June 2023, 15:37
@matthijs
Here is the true answer: Mercedes here is a so called collective noun – a singular nous that refers to a group of people and so the 3rd person plural verb form, not the singular, is applied.
Other examples:
The police have found the suspects. Italy have beaten Spain in a football match. RedBull have won the race.
The police were doing the investigation. Italy are winning the game. RedBull are at the lead in the constructors’ championship.
Matthijs (@matthijs)
28th June 2023, 7:56
Thanks asd, that makes sense. However, in the caption only Mercedes is plural, Williams is singular
Darryn Smith (@darryn)
27th June 2023, 18:12
This site has a ton of grammar mistakes. They don’t take pride in their work. Don’t try to learn English from this site unless you want to spot grammar errors.
Matthijs (@matthijs)
28th June 2023, 7:56
@darryn I had no intention to critisise the autors on this website. I don’t agree with your sentiment. This website is still my numer 1 to go to for F1 related news.
SteveP
27th June 2023, 20:33
So do many English native speakers, to the extent that some well-educated people wince.
As to what is spoken over the other side of the pond – that’s best described as American, which is a dialect as quirky as Black Country (“I am, you am, he am, she am, they am” is entirely correct)
That aside, most nationalities are used to the idea that native speakers ignore grammatical rules when speaking and are used to non-nationals standing out as obeying the rules and letting the difference slide.
Moi
27th June 2023, 10:51
He misrepresents the difference somewhat I think.
A 300m prior investment in assets would show up in the P&L as a partial writeoff each year (eg 10%), which would count against the costcap. So a 300m investment would ‘cost’ Merc 30m each year against the costcap.
Williams mat have trouble raisin the initial 300m of course, but that is a capital issue not a costcap one.
Biskit Boy (@sean-p-newmanlive-co-uk)
27th June 2023, 11:49
I’m sure the it’s the cost cap that is the issue going forward, if Williams were able to find 300m in capital they couldn’t use it!
Moi
27th June 2023, 23:04
The point is that if they ‘found’ 300m, it would not weigh on the costcap as 300m that year but rather as 300 divided by however many years the writeoff period is. Which can be anything from 3 to 25 or more depending on what it is exactly.
SteveP
27th June 2023, 20:35
Write off at 7-years-to-zero is regarded as a long service life in most instances
slowmo (@slowmo)
27th June 2023, 12:40
Assuming the budget cap remains in place it will over time sort itself out to a degree as teams will need to refresh and modernise their facilities after 10 years or so. The real worry is what this means for new teams joining F1 afresh. Clearly they will need to build facilities to enter F1 and I doubt these will be included under the budget cap prior to entry to the sport so that has the potential for a new team entering the sport with a huge capital expenditure to setup the team with the latest and greatest equipment.
I think the real kick in the teeth for the likes of Williams is when new teams enter the sport with better facilities than them. A well financed new team would have better facilities and more development budget and should in theory outpace them in pretty short order.
Facts&Stats
27th June 2023, 12:50
Maybe overspend massively in the first year and take the hit (penalty, exclusion, windtunnel time, walk of shame, etc.) and know that you will be at the same level as the biggies from then onwards (equipment wise).
Also they can get some inventive lawyers to find the loopholes, e.g. invest in all the equipment to set up a massive marketing campaign (say it is used to develop a mock-up show car), or enter the Americas Cup.
Esploratore (@esploratore1)
27th June 2023, 20:52
True, being excluded for your first year is a non penalty for a new entrant.
Ex Merc Engineer
27th June 2023, 14:12
Is there a week that has passed with JV complaining about Williams’s installations? We got the point.
Carbonized
28th June 2023, 12:37
Probably one single interview fed to us one headline at the time.
Nick T.
28th June 2023, 18:01
The squeaky wheel gets the grease. He’s be doing his team a disservice by letting it lie. Skip articles on the subject or quotes from him if it bothers you so much.
ps – 90% of the time repetitive complaints or insults are linked to the initials “JV,”’ it is Jacques Villeneuve being talked about.
grat
27th June 2023, 15:46
If the cost cap truly prevents upgrades to infrastructure, then F1 is doomed in a few years anyway. In the IT world, a “generation” is 3 to 5 years– the time from which a technology is “state of the art” to “obsolete”, or at least, behind the times.
I would expect that motorsport technology would have a longer lifespan, but even so, once you’re in the 7 to 10 year range, the equipment will no longer be “state of the art”, and maintenance costs will start increasing. Teams will be forced to choose between investing in infrastructure, or investing in the car design.
The “bespoke constructor” model is at odds with the “cost cap” model, and always has been.
The Dolphins
27th June 2023, 17:00
It’s a tricky situation for Williams/James. I can’t think of any F1 teams who would be keen on sharing resources (e.g. leasing wind tunnels) with Williams (or any other competitor) either; not just because of the possibility of intellectual property being leaked but why risk helping someone to make a few pounds which you can’t spend, to increase your performance, due to the cost cap.
Coventry Climax
27th June 2023, 22:03
That’s quite similar to how it goes in the real world.
Jim from US (@jimfromus)
28th June 2023, 0:54
Is this why none of the existing teams want new teams? A new team could purchase $500 million in stuff before applying to become an F1 team. This puts all existing teams on the back foot.
Darryn Smith (@darryn)
28th June 2023, 1:09
I think they just want the status quo. They all get paid and that pay would be reduced with more teams in the equation. They don’t believe in growing F1 and only want to strip it for what they can.
Bonbonjai
28th June 2023, 12:38
Them wanting the status quo is self explanatory, however I don’t see them not wanting F1 to grow. They just don’t want to be one to a hit financially for the priveledge. And who can blame as ultimately, the commercial rights holder should take that one. But what ba surprise they don’t want to either.
DB-C90 (@dbradock)
28th June 2023, 3:58
Wow, I must admit that I though Capex wasn’t included in the cost cap and wasn’t aware that there was a separate cap for that too.
That certainly will provide a significant number of years advantage to the bigger teams.
I’d be quite happy for some kind of allowance to be made for the smaller teams – perhaps something like a cap on Total Infrastructure Value would be a better option rather than a set limit on spend so that if we use an example of say 1 Billion, those that have total capital assets worth 800 mil can spend $200 mil whereas a smaller team with 200 mil worth of capital assets can spend up to 800 Mil to catch up on the infrastructure side of things (assuming they have investors prepared to put up that sort of capital)
Then we might actually get a proper meritocracy where design counts more than being unable to manufacture parts that are as light and efficient as the bigger teams parts.
Stoo (@stewart51)
28th June 2023, 12:26
The FIA may as well scrap the whole idea of a “budget cap” and let the sponsorship provide the money to purchase the best capital equipment out there, because then ALL teams would have the same opportunities.
If they then didn’t use those opportunities to the max then they have a reduction in performance. Simples!