Will this win the World Cup with money? Is the team able to afford promotions longer because they have more room to win? The teams, which are sailing close to the budget limit, are warning that they will have to stop further development mid-season.
At the same time, there is a concern that one of them will hide the real costs or face a penalty in order to continue to bear the costs of a critical upgrade.
Teams maintain rosters
Teams chase each other to see what the other is doing. For example, rosters are created in which the new parts are precisely identified and which individual teams bring to the start in any race. From the small fin on the brake ventilation to the lower part of the body.
In the past, interest was limited to technology. I wanted to know what promotions you made in time to better understand the opponent and maybe learn something.
Since last year, teams have been working on creating a second roster. Displays the calculated costs for individual promotions. The front wing or lower part is priced at 100,000 euros, while the rear wing is 65,000 euros. This is not much different at Haas than at Ferrari. The cost of McLaren’s upgrade to Barcelona is 700,000 euros for two cars. Without spare parts.
Ten percent for the arms race
Since a budget cap was introduced in Formula 1, the mistrust has only increased. There is now a new playground for gray areas and gaps. With development costs collapsing, teams want to know if the opponent is playing honest. Ferrari team principal Mattia Binotto fired a warning shot at Red Bull in Miami: “It’s no longer possible to bring new parts into every race. With the pace of development we are seeing now, many teams will soon have to reach the extremes of the cost ceiling.”
Top teams estimate about ten percent of the allowed budget to develop their cars. So about 14 million dollars. Small teams have more room for improvement because they have fewer employees and therefore lower wage costs and also save in other ways. Material costs are calculated for new parts only. The engineers have to be paid one way or another, as the wind tunnels all operate at the full hourly rate allowed by the rules.
According to this account, Red Bull and Mercedes are already close to what they could theoretically spend on new parts in the arms race after the Spanish Grand Prix. “If everyone plays honestly, there will be no further development after the Canadian Grand Prix,” experts predict. The team boss threatens “or we have to lay off 50 people”. Red Bull boss Christian Horner painted the devil on the wall, saying: “After that, some teams can’t lead the last races.”
New cars exacerbate budget problems
This affects teams who are currently exhausting the $141.2 million cost cap. In theory, Haas, Alfa-Sauber or Williams would have more space, but not the money to use the bonus. For example, Sauber is $10 million under budget.
In principle, all teams like the idea of a cost cap. But six of them are now calling for the fiscal rules to be adapted to the terms of the new framework. Historically, the budget ceiling should have been $175 million. When the Corona pandemic pushed some teams to the brink of collapse, everyone under the pressure of events agreed to reduce the cost limit in three steps. From 145 to 140 and 135 million dollars.
In the first year of the cap, the 10 teams coped well with the new limit, even though it was an attempt by Ferrari, Mercedes and Red Bull to starve themselves to 145m. It helped that in 2021 many parts had to be taken from the 2020 cars due to homologation. This saved the teams $30 million. But already in the second year, the paper house seems to be falling apart. The season has only gone six races and 75 percent of the teams are sounding the alarm.
Inflation costs an additional $8.4 million
Three factors tightened adherence to the budget target. The simplest task is still dealing with the reduction from 145 to 140 million dollars. New cars are already a bigger problem. This time there were no parts to grab. Everyone complained “so we actually have 35 million fewer chances”.
Then there’s inflation, which is currently 6.1 percent. Freight costs doubled, and electricity, fuel, and raw materials became more expensive. This makes the total $8.4 million. Without inflation, teams were able to follow their normal development roadmap. Now it’s halfway if Formula 1 doesn’t give an extra cost to inflation. According to the regulations, the amount would be four million dollars if the inflation rate was above three percent in September 2021. Unfortunately, it was a little less.
Both teams argue that force majeure is forcing them to deny Formula 1’s DNA and to halt development soon. Sauber’s team boss, Friedrich Wasser, opposes this. “Inflation has nothing to do with force majeure. The pandemic has been force majeure. Inflation is a natural process. Teams that don’t have much room for improvement can react to it very easily. They just have to close their wind tunnel and build fewer parts. Shipping and electricity are getting more expensive.” For us, we have to deal with it somehow.”
Fear of budget breakers
Advocates of an inflation surcharge fear some will go for it and over budget by as much as five percent, because this is considered a minor offense and the penalty is set by agents. With luck, a budget breaker will get away, even if the judges classify him as force majeure. But no one knows beforehand, so she’s playing with fire.
The World Cup can decide that. If you add two more upgrades, even though you don’t have the budget for them, you fool yourself and get a massive competitive advantage. If he then got away with the black eye, he did everything right.
There are also concerns that costs are hidden by gimmicks in other areas. Large teams have many opportunities to do this because they have diversified into many lines of business in response to budget caps to reduce the need to lay off employees and prevent their employees from leaving to compete.
But who ultimately wants to determine whether an engineer is upgrading an airplane or a race bike? One warns: “Currently we do not have enough experience and transparency in monitoring financial rules to rule out fraud.” “The financial rules are still new and should be adjusted based on the experiences we are having now.”
Struggling to compromise
Representatives of the top teams fear that in this environment in the second half of the season there will be a lot of doubts and accusations that could harm Formula 1. And that’s when someone appears with new parts, although he has already exceeded the permissible limit sportingly.
So they are asking the FIA and F1 management to add an additional inflation fee to the budget this year. Both support the application, but entrenching it in financial regulations requires the approval of eight teams. Currently, it is opposed by Alpha Sauber, Williams and Alpine. Haas is still divided.
The hardliners take the stand: “Rules are rules.” “If we abandon the rules now, it would be the end of the budget cap,” Vasier warns. Alpine team boss Otmar Szafnauer also shows a little understanding: “If we can do it, others should do it too.” The opposing party asks the objectors to surrender. “When we agreed to cut from $175 million to $145 million, we showed responsibility to the sport. Now it’s up to you to bring back that same responsibility.”