The introduction of a budget spending limit for Formula One teams for the 2021 season, created controversy when the numbers were audited in 2022 by the FIA. Red Bull were found to be in technical breach and fined the second largest amount ever seen in the sport.
Now in year three of the spending restrictions, the results are on the whole positive . Despite Reed Bull dominating proceedings, the gap between the midfield teams is tighter than it has ever been before.
Unknown capital cost cap limit
However, the cost cap headlines mostly related to the amount of money the teams spend on designing, building and taking their cars racing for a year. However, there is another spending restriction less well known that seeks to stop the teams blowing gazillions on capital items such as wind tunnels and machinery, which again would benefit the richer F1 outfits.
F1’s financial regulations previously set a uniform CapEx limit for all teams. This was effectively $45million a year for the four-year reporting period covering 2021-2024, which was then dropped to $36m for 2022-2025.
Yet this has added to the inequality that existed in the sport prior to the cost cap era. The bigger and richer teams already had modern equipment as the regularly updated their facilities.
However, the regular bottom four teams in the championship are way behind in this kind of investment, something James Vowles highlighted when leaving Mercedes to become Williams’ team principal.
Williams equipment 20 years out of date
“There are some elements that are 20 years out of date, which makes sense if you think through the history of this team,” Vowles revealed this summer.
“The investment it had was zero for around about 20 years, and then an investment firm came through.
“Fundamentally, we’re in a situation where a lot of facilities were almost preserved from where they were 20 years ago,” concluded the Williams boss.
Vowles has been leading the charge for the bottom teams to be given an expedition from the Capital cost cap to allow them to catch up to those in the midfield. Yet predictably there has been disputes among the bigger teams, Ferrari in particular, who have questioned whether these exemptions should be given.
CapEx budget increased
Finally, it was agreed that based upon the results of the 2020, 2021 and 2022 seasons, the four least-performing teams – Williams, Haas, Sauber and Alpha Tauri – have been allocated special ‘catch-up’ spending allowance outside the capital budget cap to improve outdated infrastructure.
The incremental amount has been welcomed, particularly by James Vowles who agreed the extra funds are a “good step” but not “the 100 (million) I was looking for”.
Ferrari maintain their position no exemptions should be granted and team boss Fred Vasseur claimed it is “dangerous” for Formula 1 to risk damaging the cost cap principles because the teams currently are in good financial health.
Surprisingly, AlphaTuari who are eligible for the exemption have broke ranks as CEO Peter Bayer reveals, “I agree with Fred actually.”
AlphaTauri CEo breaks ranks
Bayer has been recruited from his FIA role of executive director of F1 and secretary-general for sport as part of the restructure of the Red Bull sister team.
“Having been involved in the development of the cost cap, the idea was really to make sure that all the teams will either squeeze into a certain number or have a chance to actually hit that number,” he said in Qatar.
AlphaTauri short of cash
Yet operational spending under the annual cost cap is being increased due to the inflationary pressures the teams have suffered over the past two seasons.
“Whilst in principle it’s nice, currently we (Alpha Tauri) don’t have the money, so I have to try and find the money, the sponsorship,” Bayer revealed.
“It’s challenging, because you’re making a plan and you’re deciding on your investment and then suddenly, within six months, regulations change and you have to go back to your shareholders in my case, and that was not as pleasant as it might look.
“We’ll deal with it, but that’s my opinion,” he added.
AT set to buy parts from Red Bull
AlphaTauri are set to change the way they operate from next year where they will now buy in most of the parts from Red Bull allowed under the FIA rules.
F1 teams must design their own cars under the regulations and develop their own intellectual property for the big ticket items. Yet Haas F1 demonstrated they could run a team without building a completely independent manufacturing facility through their arrangement with Ferrari to buy the “listed parts.”
Of course this means teams operating on this basis do not need the full suite of machinery and software that do those designing and producing all their components.
Williams ‘old school’ operations
Williams unlike Haas and AlphTauri will remain a team producing the majority of their car and so for them the capital expenditure incremental spending allowance is more important.
Further, AphaTauri have suffered a funding crisis as the sports brand which has the naming rights for the team has been suffering financial difficulties.
Next season it has been rumoured ADIDAS will become the sponsor of the sister Red Bull team which should unlock more funds for their F1 challenge.