The Origins of the Cost Cap
Despite years of failing to get the Formula One teams to agree to a cost cap on their annual spending, the FIA finally benefited from the advent of COVID-19. With the sport facing ruin, the larger teams finally agreed to restrict their spending below an agreed amount.
For 2021, the limit on spending was set at $145m, and the FIA had agreed to a dry run for the teams the previous season. Red Bull declined to participate in the preparatory season and promptly fell foul of the rules for minor reasons in 2021.
The FIA then tightened the limit to $135m, where it stayed until the current season, when it was lifted by a huge amount to $215m. This was to allow for the all-new regulations kicking in, but it also included a number of items previously outside the regulatory spending limits.
Mercedes appear to be struggling with this year’s budget, given George Russell explained at the Bahrain Grand Prix—hosted in Malaysia—that he had no cooling vest to wear because the team had preferred to spend the money on the performance of their car.
Capital Expenditure and the “Cost Cap Trap”
Outside the regular cost cap sits a capital expenditure cost cap, which prevents the teams from spending hundreds of millions on new premises and equipment. Aston Martin spent over $200m on their state-of-the-art facilities in Silverstone, but this was before capital expenditure was regulated.
Up to 2026, the capital expenditure spending limit was broadly $35m, although some of the smaller teams, like Williams, received some incremental concessions after claiming they were locked in a “cost cap trap.” Years of underinvestment meant they were using spreadsheets, whereas Mercedes—where Williams’ team boss previously worked—had state-of-the-art and bespoke resource management IT systems.
The capital spending limits were removed this year and are to be included in the overall cost cap now set at $215m. Yet this doesn’t help the smaller teams, argues James Vowles, given they have to sacrifice some of their racing budget to upgrade their machinery and processes.
The Threat of Underinvestment and Inequality
All this has prevented Williams from delivering a McLaren-style revival, given the Woking-based team in its wilderness years continued to invest in their HQ; they merely failed to utilise the state-of-the-art Woking Technology Centre well.
Vowles is now arguing that the cost cap as it stands is baking in the advantage of the larger teams and could spark a spiral of underinvestment in the smaller outfits. The less competitive they become, the less sponsorship and partner investment they get, and eventually, the valuations of their teams fall. This could affect the top teams if F1 was downgraded due to its poor sporting profile.
North American sports leagues have recognised this and put in place various mechanisms to ensure they don’t end up with something like La Liga, where each year Barcelona or Real Madrid pretty much win the championship.
Proposed Solutions and Voting Majorities
The solutions to this conundrum are varied and require different levels of support. Vowles would like new regulations to be pushed through for 2027; for this, he requires a supermajority, which would include support from the FIA, FOM, plus six of the current 11 teams—so Williams and five others. This will secure what is known as a supermajority.
For 2028, a simple majority would be required, which would entail support from the FIA, FOM, plus four teams in total—so Williams and three others. This is known as a simple majority. Vowles believes he already has support from Audi, Aston Martin, Cadillac, and Alpine.
Leveling the Playing Field
To level the playing field, one methodology would be to implement a system similar to the manner in which aerodynamic testing is regulated. Every six months, the team at the top of the championship receives a discounted amount of wind tunnel and CFD computing time. This drips its way through the field, with the last team receiving the most allocation of resources.
The same could be done with the cost cap. A baseline is set that all teams receive, but the teams lowest in the standings receive an incremental amount over and above the others above them. This could even be staged so the top four receive a specific amount, then the next three receive the same incremental amount, with the bottom four receiving even more.
Operational Inefficiencies for Smaller Teams
The problem for the sport is that the smaller teams, which have had the least investment, already spend more of their budget doing exactly the same things as the larger teams. Comparing his experience from his time at Mercedes, James Vowles revealed: “One car is about 30% more expensive compared to what I remember from a previous team.”
This is simple to understand in that a bigger team, having invested in its manufacturing capabilities and processes, is operating at 21st-century efficiency. The likes of Williams, with equipment some 20 years old, cannot hope to build a car for the same money as Mercedes.
So now we have the smaller teams having to spend more of their budget to catch up with their capital expenditure, whilst they are already in deficit to the amount they can spend on building a race car due to inefficiencies they have built in when compared to the bigger teams. The gaps between them will merely continue to rise.
Alternative Financing and Future Risks
If the aerodynamic resource allocation model is unacceptable, there are other ways of providing additional finance to the smaller teams. This could kick in should a team fall more than 100 points behind the leader in the constructors’ championship, or in a similar fashion to how the engine catch-up system is being implemented.
F1 is enjoying a mega boom in terms of partners, sponsors, attendances, and eyeballs on TV. Yet the entire ecosystem, which now values some of the top teams in excess of an eye-watering $5bn, could come crashing down if the playing field is not perceived to be fair.
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A.J. Hunt is Senior Editor at TJ13, where Andrew oversees editorial standards and contributes to the site’s Formula 1 coverage. A career journalist with experience in both print and digital sports media, Andrew trained in investigative journalism and has written for a range of European sports outlets.
At TJ13, Andrew plays a central role in shaping the site’s output, working across breaking news, analysis, and long-form features. Andrew’s responsibilities include fact-checking, refining editorial structure, and ensuring consistency in reporting across a fast-moving news cycle.
Andrew’s work focuses particularly on the intersection of Formula 1 politics, regulation, and team strategy. Andrew closely follows developments involving the FIA, team leadership, and driver market dynamics, helping to provide context behind the sport’s biggest stories.
With experience covering multiple seasons of Formula 1’s modern hybrid era, Andrew has developed a detailed understanding of how regulatory changes and competitive shifts influence the grid. Andrew’s editorial approach prioritises clarity and context, aiming to help readers navigate complex developments within the sport.
In addition to editorial duties, Andrew is particularly interested in how media narratives shape fan perception of Formula 1, and how reporting can balance speed with accuracy in an increasingly digital news environment.
