Zynerji wrote:While explaining the engine limitations based upon cost saving to my brother last night, his immediate question was:
"Do they not spend more on R&D to make them last that long than just manufacturing 20 engines for the season? "
Thanks!
There is at least a vague method to the madness.
The cost to a factory engine supplier (like Mercedes or Ferrari) to sell a season-long engine package to a customer team is not 1/2 or 1/3 of their total engine budget, rather it is the marginal cost of producing 10 extra engines (5 engines/car times 2 cars/team) after the R&D is paid for. The R&D is a sunk cost and has no relevance to determining price to an individual customer team. There is some, caution
some, logic to requiring each engine to last longer because this drives up the R&D cost (which again is relevant to the manufacturer but not to customer pricing) but it conceivably lowers the marginal cost to the customer because now a two-car team needs just 10 engines per season instead of 42 like if they used a new engine every race weekend. This makes it cheaper for manufacturers to supply customers, no question.
The downside is that the marginal cost increase for producing an extra 10 engines (i.e. the actual cost of supplying a customer) does not necessarily have any relevance to what manufacturers charge customers. The marginal cost may be $10 million but they charge $20 million because that is the market-clearing price. Notice the market clearing price still has no connection to any underlying R&D cost.
Yes a muddled situation. I think the idea of requiring engines to last X race weekends came from Max Mosley when he was making a (pains me to say it) good faith effort to lower the cost of F1. The current Formula 1 status quo does not include the comprehensive financial reforms envisioned by Max Mosley but it does include some piecemeal legacy elements of that era. Thus the current combination of low supplier marginal cost (due to engines that last several race weekends) and sky-high engine package prices (whatever the market will bear from teams that want to compete in F1). Arguably the best conceivable combination for engine suppliers.