Since its inception in 1946, many regard Formula 1 as the pinnacle of motorsports. Featuring the quickest cars and the highest level of racing, the best of the best compete in this sport, and it’s quickly growing. With a cumulative TV audience of 1.55 billion in 2021, and F1 expecting to sell out tickets for all of its record-tying twenty-two races, it’s not hard to see that F1 is one of the biggest and most popular sports in the world. However, with billions of dollars fueling the sport, F1 may also be the most expensive sport in the world.
From powerful hybrid engines to efficient energy recovery systems to weightless carbon-fiber chassis, F1 teams spend hundreds of millions of dollars every year developing the quickest car possible. Before 2021, top teams such as Mercedes spent more than $450 million in one season alone to develop a championship-winning car. In 2021, a budget cap rule was implemented to create a more competitive field. This year’s budget gives each team $140 million. The cap covers expenses related to car performance such as car design and manufacturing, but excludes marketing costs, driver salaries and repair costs.
The cost cap figure for 2022 is not final, however. With inflation skyrocketing worldwide, transportation and logistical costs are now eating into many teams’ budgets, and it’s not hard to see why.
F1 is one of the most logistically challenging sports in the world. Twenty-two races, twenty countries and five continents in less than nine months. 1,540 tons of equipment and 532 vehicles are transported more than 74,500 miles through land, air or sea. DHL, F1’s official logistic partner, uses anywhere from five to seven Boeing 777 freighters for a flyaway event (a race outside of Europe). This is what it costs to organize F1 races.
Red Bull’s Team Principal Christian Horner weighed in, stating “Seven of the teams would probably need to miss the last four races to come within the cap this year … Energy bills, costs of living, costs are going exponentially, and F1 is not exempt. Freight has quadrupled and that’s not something we can control.”
Fortunately for Red Bull and the rest of the grid, the F1 Commission recently agreed to a 3.1% increase in this year’s budget to account for inflation. While these growing costs are accounted for in the budget cap, another major cost is not: driver salaries. With salaries reaching as high as $40 million and half the grid earning more than $10 million, teams still need to earn money and turn a profit if they hope to compete. F1 is a business, after all.
F1 teams can earn money in many ways, from manufacturers to payments from F1 itself, but the most lucrative way is through sponsorships. Each team has a main or technical sponsor and additional smaller sponsors. Perhaps the most recognizable is Oracle Red Bull Racing, with main sponsors as, you guessed it, Red Bull and Oracle. The energy drink giant has poured nearly $2.3 billion from 2004 to 2018, and the U.S. tech company recently signed a five-year, $695 million sponsorship deal with the F1 team. Another notable sponsorship is between Dell Technologies and McLaren, which recently signed a multi-year extension to continue its four-year partnership.
The finances of F1 are complex, with billions and billions of dollars circulating the sport every season. For example, hosting an F1 race could cost up to a billion dollars alone, with annual hosting fees reaching as high as $55 million, running costs averaging $57.5 million a year and construction costs averaging about $270 million per circuit.
Much like F1 cars, the sport of Formula 1 has thousands of moving parts, all backed by finances. From logistics to development to hosting races, Formula 1 may be the most financially impactful sport in the world.
Sohum Pavaskar is a Bear Bytes Blog writer. Contact him at spavaskar@dailycal.org.