After Liberty Media-owned motorsport series Formula 1 posted revenues of $381m for the first quarter of 2023 – and another victory from Max Verstappen in Monaco last weekend-, let’s take a look at the industry, starting with team’s expense structure.
The introduction of the budget cap in Formula 1 marks a significant milestone in the sport’s financial regulations. The budget cap for teams is set at $135M for the 2023 season, with room for a rise in line with inflation. This cap aims to create a more competitive and sustainable environment by curbing excessive spending, particularly by the larger teams, and promoting cost control across the board.
However, it is important to note that the budget cap does not encompass all expenses incurred by teams. Certain items such as driver salaries and marketing expenses are not included. This exclusion allows teams some flexibility in their financial operations while ensuring that most of the core areas of expenditure are subject to cost control.
Car Development and Performance
A substantial portion of teams’ expenses is dedicated to car development and performance. Investments in research, design, and engineering enable teams to design cutting-edge race cars that meet the stringent technical regulations of Formula 1. These expenses include wind tunnel testing, aerodynamic enhancements, chassis development and engine upgrades.
Another significant component of teams’ expenses is personnel costs. Formula 1 teams employ a vast array of professionals, including drivers, engineers, mechanics, strategists, and support staff. The salaries, bonuses, and benefits of these personnel contribute to the overall expenditure of teams. Acquiring top talent and retaining experienced individuals are crucial for success in the highly competitive world of Formula 1.
Total number of employees in F1 Teams in 2022
- Mercedes AMG Petronas – 1200 Employees
- Oracle Red Bull Racing – 1000 Employees
- BWT Alpine – 950 Employees
- McLaren F1 – 900 Employees
- Scuderia Ferrari – 700 Employees
- Williams F1 – 700 Employees
- Aston Martin Aramco Cognizant – 500 Employees
- Scuderia Alpha Tauri – 400 Employees
- Alfa Romeo Orlen – 300 Employees
- Haas F1 – 250 Employees
Logistics and Travel
As a global sport, Formula 1 involves extensive travel and logistics. Teams must transport personnel, equipment, and race cars to various locations around the world. Expenses related to transportation, accommodation, and logistics management are considerable. Ensuring the safe and efficient movement of personnel and equipment is vital for teams to participate in races and testing sessions.
Sponsorship and Marketing
Formula 1 teams heavily rely on sponsorship and marketing partnerships to support their operations. While sponsorship revenues can help offset expenses, teams often invest in marketing initiatives to enhance their brand presence and attract sponsors. These expenses may include advertising campaigns, promotional events, and digital marketing efforts. Although not subject to the budget cap, teams must balance their marketing expenditures to ensure a healthy return on investment.
Despite the budget cap, there are certain expenses not included in the defined limit:
- F1 driver salaries
- The wages of the three highest-paid staff members
- Travel costs
- Marketing spend
- Property and legal costs
- Entry and licence fees
- Any non-F1 or road car activities
- Parental and sick leave payments
- Employee bonuses and staff medical benefits