The FIA for the first time introduced financial regulations into Formula One which came into force in 2021. The cost cap as it has become known is designed to limit the amount of money each F1 team can spend on designing, building and racing their car for a calendar year.
The cost cap is designed to achieve several objectives. Firstly, it aims to create a more level playing field for all teams by reducing the financial advantage of larger teams. Secondly, it is supposed to promote financial stability and sustainability within the sport.
F1 Cost cap rationale
Finally, it is meant to encourage innovation and efficiency by forcing teams to be more creative with their resources.
There are a number of items not included in the finacial restrictions including the drivers’ remuneration together with that of the three largest earners within the team.
Capital expenditure on the likes of new wind tunnels and simulators are also excluded as the Aston Martin team clearly demonstrated in their new $200m factory in Silverstone.
However, there was always concern that a number of the teams would be able to bury certain costs in non-F1 related projects in which they are involved.
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Red Bull and Mercedes are presently engaged in designing America’s Cup racing sail boats something their new Technical Director James Allison was overseeing until last month.
Red Bull also have a NASCAR project and Ferrari famously their recent endurance racing project hypercard which won the 24 hour of Le Mans.
TJ13 revealed earlier this year that Aston Martin had transferred a hundred and sixty eight of their staff into another group company called Formtech wearing differently branded clothing, yet the staff were in reality still working on the team’s F1 project.
For road car manufacturers like Mercedes and Ferrari it would be easy for them to hide away for example some gear box research and development in their road car divisions and for this reason critics of the cost cap believe it to be a waste of time.
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Now into its third year of policing the cost cap, it appears the FIA have cottoned on to the fact teams are hiding expenditure and has acted to shore up the regulations.
F1’s governing body has introduced a new technical directive TD45 in an attempt to combat the transferral of intellectual property. The FIA has no power to regulate non-F1 activities the various other divisions of the teams operate but it now states that any intellectual property imported from non-F1 projects into the team be accounted for as part of the cost cap.
La Gazzetta dello Sport now claims Aston Martin, Ferrari, Red Bull and Mercedes have all received ‘requests for clarification’ from the FIA over knowledge they’ve gained from their non-F1 projects.
Autosport further claim that a ‘source’ has revealed the new directive is already impacting some of the teams involved. “Some have been forced to act because they realised what they were doing is no longer allowed.
The problem is the TD is retrospective and includes items from January 1st this season, which means some of the teams will now have overspent when they account for the newly classified intellectual property.
Last year Red Bull were famously punished for a “minor breach” in the cost cap and fined the second largest amount ever in Formula One history of $7m. The further received a reduction in their aerodynamic testing time of 10%.
Christian Horner has claimed that six teams may be in breach of the 2022 cost cap due to be reported on by the end of this month. Further he claimed such was the level of Mercedes car development they would definitely fail to remain within the financial limits.
“Under the budget cap, it has been surprising just the amount of development… But it has certainly been surprising the rate they have developed,” claimed the Red Bull boss of Mercedes.
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Alpine’s Otmar Szafnauer believed that Mercedes have been benefitting from loopholes in the cost cap regulations.
“What some of the other bigger teams are now doing is they’re looking to exploit or have a better understanding of where there are loopholes or some organisational changes you can make to actually stuff more people under that budget cap.”
“They’re looking at, ‘Yeah, I got rid of a hundred people, but now I want to hire back because under the budget cap I was able to find spots for them where they either don’t count as a whole person or they do some marketing stuff or whatever it is, or they work on a boat for some of the time’.”
Exactly how the FIA will police this is unclear at present and it appears to rely on the honesty of the teams involved to ‘self declare’ any additional spend that should be accounted for in their F1 budgets.
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