What do the latest F1 team finances reveal about the health of the series?

With Andretti’s bid to enter Formula One successfully navigating the first stage, are existing teams right to be concerned about the impact an 11th outfit could have on their finances? BlackBook Motorsport analyses the recently released 2022 financial figures to evaluate the legitimacy of the concerns.

Financial talk has dominated the world of Formula One since the International Automobile Federation (FIA) approved Andretti’s entry into the series.

It is likely that even those that loosely follow the sport will have seen an impassioned speech from a team principal in recent weeks emphasising the sanctity of Formula One having ten teams. Whether it be Ferrari’s Frederic Vasseur claiming that a new entry must bring “massive added value” or James Vowles at Williams saying his organisation is “strongly against” an 11th team, there is clear concern in the paddock about having to share prize money with another outfit.

The bottom line has always dictated proceedings in Formula One, and a history of shaky finances means conservative attitudes are important, especially for the smaller outfits. The last team to go out of business was Force India in 2019, only to be saved by investment from Canadian billionaire Lawrence Stroll.

Since then, recent years have provided a certain level of comfort to the Formula One grid. The boost in popularity driven by Netflix docuseries Drive to Survive combined with the introduction of a budget cap has created a stable environment for teams, and the series recently revealed that all ten of its outfits operated within the US$140 million cost limit in 2022.

While the ‘closed-shop’ mentality being pushed by team bosses might appear greedy on the surface, it is informed by decades of turbulent financial history in the sport. But can we compare the spiralling costs of previous seasons to the financially regulated Formula One of today?

The latest available financial accounts have recently been released by six teams for the year ended 31st December 2022. Last season was the second year of the budget cap, so the results are a good indicator of the direction in which Formula One is heading, although they fall short of telling the whole story.

Leading from the front

While fans may have only enjoyed one season of on-track rivalry, Mercedes and Red Bull have been the dominant forces in Formula One in recent years.

Not since 2009 has a team not called Mercedes or Red Bull won the constructors’ championship and, even then, that year’s victors were Brawn GP, the outfit that became Mercedes the very next season.

Mercedes’ status as an automotive manufacturer provides a financial advantage, as does the fact the team generates income from supplying both McLaren and Williams with engines.

In 2022, Mercedes’ total turnover reached UK£474.5 million (US$577.7 million) compared to Red Bull Racing’s UK£278 million (US$338.5 million). This translated to profits of UK£89.7 million (US$109.2 million) and UK£2 million (US$2.4 million), respectively.

Mercedes and Red Bull can count on the most lucrative title sponsorship deals in the sport, with Petronas paying the former a reported US$75 million and the latter boasting a US$60 million-per-year deal with Orcale

These are two teams at very different points in their journey. Red Bull are investing heavily in an engine department that will see them produce their own engines for the first time. This saw parent company Red Bull Technology suffer a 5.3 per cent drop in profits year-over-year (YoY), despite delivering more revenue.

Plus, as these figures are for 2022, the benefit of the increased prize money from winning the constructors’ championship has not been fully realised. The Milton Keynes-based outfit has also now won two titles in a row.

There is also the small issue of Red Bull’s UK£6.2 million (US$7 million) fine paid to the FIA for a minor breach of the sport’s financial regulations, which resulted in an unusual rise in administrative costs for the season.

In short, these are not the teams that should be worried about a potential Andretti entry, especially when considering their shared history of uncurbed spending. Estimates put budgets at around UK£370 million (US$450 million) before the budget cap was implemented.

Stuck in the middle

2023 has been a year of frustration on the track for both Aston Martin and Alpine, despite the former’s electric start to the season.

With both teams firmly settled into the midfield as this season comes to a close, their financial reports for 2022 paint a similar picture for the teams away from the circuit – but for different reasons.

Aston Martin and Alpine both generated increased turnover, reaching UK£187.7 million (US$228.5 million) and UK£249 million (US$303 million), respectively. However, profits dipped for both outfits.

While Alpine recorded fairly healthy profits of UK£26.2 million (US$31.9 million), which represented a 9.8 per cent fall YoY, Aston Martin struggled. The Silverstone-based team suffered a loss of UK£52.9 million (US$64.4 million), a 22.1 per cent increase compared to last year.

Go deeper

Dig deeper, though, and it becomes clear that these are again teams heading in different directions. Aston Martin have been working on a UK£200 million (US$276 million) headquarters since 2021, so their expenditure has been unusually high.

Alpine, meanwhile, were stagnating in 2022, restricted by a managerial malaise that has only recently started to be rectified with the appointments of Philippe Krief as chief executive and Bruno Famin as interim team principal.

The Renault-owned team has also benefitted from a €200 million (US$212 million) strategic investment led by consortium Otro Capital, which has been further boosted by the addition of numerous sports stars to the investor group, such as golfer Rory McIlroy, boxer Anthony Joshua, and National Football League (NFL) ace Travis Kelce.

Renault will also be one of the two parties in line to benefit from the addition of Andretti, as FIA regulations stipulate that the engine supplier with the least amount of customers has to supply a team in need of an engine. In 2026, Renault will supply only Alpine, and Honda will supply only Aston Martin.

Financial frugality appears to be a short-sighted strategy for Formula One’s midfield.

Fighting for every last point

Towards the back of the field are the teams that matter most in this debate, which is why the likes of Vowles and Haas team principal Gunther Steiner are repeatedly so vocal in their opposition to Andretti joining Formula One.

While financial figures for AlphaTauri and Alfa Romeo are not available – and so a full picture of the backmarkers cannot be established – the former has the backing of energy drinks giant Red Bull and the latter is in the process of being acquired by German manufacturer Audi.

A team towards the back of the grid is going to struggle to attract sponsors compared to those further forward, and this shows in the annual revenue figures for both Williams and Haas. The former recorded turnover of UK£142.8 million (US$173 million) in 2022, a 48 per cent increase YoY, and the latter managed to generate UK£109.7 million (US$132.8 million).

Turnover may have increased 48 per cent for Williams, but their loss margin increased by 50.5 per cent to UK£17.9 million (US$21.7 million). Indeed, team principal Vowles has already confirmed that the 2023 figures will be multiples above this.

While Haas managed to achieve profitability, a 36.5 per cent increase YoY only saw the outfit reach a UK£5.9 million (US$7.2 million) profit in 2022. For a team that relies on Ferrari for as many supplied parts as the regulations allow, as well as sharing the wind tunnel in Maranello, it highlights the margins at which the smallest teams operate.

More needs to be done

Recently, the bottom four teams were granted a UK£16.5 million (US$20 million) capital expenditure increase to the budget cap. This move was part of the FIA recognising that Formula One teams do not operate on equal ground, while the aero testing restrictions operate on a similar sliding scale.

So, as each team will be impacted by the potential addition of Andretti in different ways, why should there be a uniform anti-dilution fee? Teams want this fee increased to UK£495 million (US$600 million), but this would be split equally among all teams.

The financial implications of another team competing for precious points at the back of the field are enormous. This year’s constructors’ championship sees 18 points separate Williams in seventh and AlphaTauri in tenth. An 11th team makes those valuable ninth and tenth-placed race finishes even harder to come by.

The long-term benefits of Andretti joining the grid are obvious, but there could be serious implications for the smaller teams in the short term.

It’s a dilemma for the FIA to solve, but the smaller teams need more of a financial incentive to consider this Andretti bid a benefit for the wider sport.


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