In view of rising inflation rates and skyrocketing freight costs, Red Bull team boss Christian Horner has warned those responsible for Formula 1 and the FIA about a bleak scenario. Cost pressures and the current budget cap could result in “possibly seven teams missing the last four races to stay within the cap this year”. Is the racing series threatened with a cost collapse?
A budget cap has been in effect in Formula 1 since 2021, this year the limit is 140 million dollars. The ten teams are not allowed to spend more for the season (with the exception of driver salaries). The cap is intended to ensure that the gap between “poor” and “rich” teams does not widen too much. So more equal opportunities.
Horner: Uncontrollable cost explosion for teams
According to Horner, the lid puts many teams under extreme pressure this year due to uncontrollable influences.
“Things like energy bills, the cost of living. The costs are going up exponentially and Formula 1 is no exception. We’re seeing freight costs have quadrupled and that’s something we can’t control.”
Top teams demand inflation compensation
The FIA has a “duty of care” for the racing teams, says Horner of the World Automobile Association. “For the second half of the year, the FIA must address this issue,” demanded the Briton. It is necessary for the world association to work hand in hand with Liberty Media’s Formula 1 rights holders to get the problem under control.
Red Bull advisor Helmut Marko had already called for inflation compensation on the sidelines of the Spanish GP in Barcelona. The prices for material and transport “have risen immensely,” said Marko to “ORF”. “The pandemic and the war (Russia’s against Ukraine, ed.) were events that could not have been foreseen, and these inflation rates are not normal.” Under the current conditions, neither Mercedes, Red Bull nor Ferrari could keep the budget cap over the season.
According to the BBC, McLaren joined the call for inflation compensation.
“Or we have to lay off 50 people”
Last but not least, the inflation affects the arms race of the teams in the development of their cars. “It is no longer possible to bring new parts to every race. At the pace of development that we are now seeing, many teams will soon have to reach the limits of the cost cap,” Ferrari team boss Mattia Binotto had predicted after the Miami GP .
According to “auto motor und sport”, the top teams allocate around ten percent of their budget to developing the car. Smaller racing teams like Haas, Williams or Alfa Romeo have more leeway, for example because they have to pay fewer employees. According to experts, there can be no further development after the Canada race in June, “if everyone plays honestly,” says the report. “Or we have to lay off 50 people,” the trade magazine quoted a team boss as saying.
Vasseur opposes the greats
An inflation surcharge is currently not planned. According to the regulations, this would be $4 million if the inflation rate had been more than three percent last September. But she was just below. The inflation rate in the euro area is currently more than seven percent and in the United Kingdom, where seven teams are based, it is even nine percent.
The big teams like Red Bull therefore argue à la Marko that force majeure will force them to stop development work unless the budget cap is adjusted.
Alfa Romeo team boss Frédéric Vasseur, on the other hand, says “Inflation has nothing to do with force majeure. The pandemic was force majeure. Inflation is a normal process. The teams that don’t have much room for improvement can easily react to it. They just have to shut down their wind tunnel and build fewer parts. For us, freight and electricity have become more expensive. We have to deal with it somehow,” said the Frenchman.
Formula 1: championship of accountants?
In the end, given the financial situation, Formula 1 could also become a championship for accountants, in which tricks and creative arithmetic decide whether development or standstill. An atmosphere that quite a few team representatives consider unhealthy.
F1 and FIA are sympathetic to the demand for an inflation surcharge. For this to come into effect, however, eight teams must give their blessing. Alfa (Sauber), Williams and Alpine are now against it. “If we give up the rules now, that would be the end of the budget cap,” warns Alfa team boss Vassuer.