While the sport’s main participants, the FIA, the Commercial Rights Holder and the teams have voted unanimously for the implementation of various cost-saving measures, there is still no consensus on the budget cap.
After the novel coronavirus outbreak caused the cancellation and postponements of the first nine grands prix of the 2020 F1 season, the sport has agreed to delay the introduction of the technical regulation overhaul until 2022 and the retention of the current cars for the next season. It has also been decided that the controversial cost cap will be introduced in order to guarantee the financial well-being of the F1 outfits.
Although the budget limit was originally set at $175m, some teams suggested lowering that number even further, claiming that the current crisis could have a massive effect on the team’s budget and financial health in the coming season as well.
The most vocal was McLaren CEO Zak Brown, claiming that the sport could get into trouble and potentially lose several teams if it does not introduce drastic measures in order to promote financial stability.
“We are in a situation where if Formula 1 goes by its old habits, we’re all at extreme risk for the future of F1,” said Brown in a media conference call.
"And I think if we think forward and get with the times, we can not only survive what’s going on right now, but I ultimately think the sport can thrive and we all win,” said Brown in a media video call.
The American proposed that the budget cap should be brought down to as little as $100 million. With the sport’s top teams – Mercedes, Ferrari and Red Bull – operating with a budget that is well over $300m, such a drastic lowering of the limit would mean that they would be forced to make significant tweaks to their business model.
While it was suggested that recent talks between Liberty Media, the FIA and teams resulted in a non-official agreement about a budget limit set at $150m for 2021 and further lowering for the coming years, Brown continues to stick to his proposal of the introduction of a cost cap of $100m.
Fight for their own self-interest
While it is believed that Mercedes would accept a cost cap of $130m, Red Bull team principal Christian Horner is resistant to a budget limit below $145m. Although he is aware of the financial threat caused by coronavirus crisis, he is sure that Liberty Media will step in to prop up teams if necessary. The Briton also suggested that teams vehemently fighting for an extremely low budget cap are just trying to use the uncertainty revolving around the current situation to push their own agendas.
“Teams are competitive beasts, of course they are looking to use an angle. The cap is a discussion about competitiveness, not about money. It’s about trying to bring the top teams down to a level where the midfield teams feel they can compete. The reality is that whatever the level of spend there will always be teams that run at the front and teams that run at the back,” he is quoted as saying by The Guardian.
Liberty Media CEO Greg Maffei said this week that Formula 1's Commercial Rights Holder has already provided some teams with advanced payments to support them financially.
With the retention of the current cars for 2021, teams can save a huge amount of money that would have been injected in the development of their new cars. The retention of the chassis has already been agreed with the chance that further 19 items could be added to the list of the homologated parts. Teams are yet to agree on which parts they carry over for their 2021 cars amid growing concerns that the pecking order could be frozen for two championship seasons when only aerodynamic development is allowed.
In an earlier discussion, Horner suggested that a token system could be introduced which would give more freedom for teams to make tweaks to their design, providing them with the opportunity of improving the weak features of their cars. The token system is not unknown for Formula 1 as it was part of the Sporting Regulation in the early phase of the hybrid power unit era.
Ferrari Team Principal Mattia Binotto shares the opinion of Christian Horner when it comes to the re-defining of the cost cap. The Swiss-Italian stressed that the sport should not rush into a decision in the heat of the moment. Binotto thinks that a drastically low budget limit is not only untenable for the top teams, but it would also jeopardise the DNA of Formula 1.
“The $145m level is already a new and demanding request compared to what was set out last June,” he told the Guardian. “It cannot be attained without further significant sacrifices, especially in terms of our human resources. If it was to get even lower, we would not want to be put in a position of having to look at other further options for deploying our racing DNA.”
“F1 has to be the pinnacle of motorsport in terms of technology and performance. It must be attractive for the car manufacturers and the sponsors who want to be linked to this most prestigious category. If we restrict costs excessively then we run the risk of reducing the level considerably, bringing it ever closer to the lower formulae.”
After recognising that the McLaren-led group of teams is holding on to the introduction of a drastically low budget cap, Binotto suggested that F1 could implement a two-tier cap with a higher number for suppliers and a lower one for customers. However, that proposal proved unpopular among smaller teams.