Budget cap puts Mercedes F1 on the brink of profitability

Mercedes

Budget cap puts Mercedes F1 on the brink of profitability

A profitable Formula 1 team is almost unheard of

Sam Hall

Saturday 23 January 2021 08:59

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Daimler chairman Ola Källenius believes the Mercedes Formula 1 team could soon begin to turn a profit as a result of the new spending cap.

In past years, Mercedes has had one of the largest budgets on the grid, in part due to its high volume of staff that has pushed developmental limits, which in turn has led to continued success on track.

From this year, F1 has introduced a $145million budget cap, that excludes driver salaries and those of top-three additional earners in a team, alongside a list of other specifics.

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The cap will be reduced to $140m for next year, and then $135m for the following three years through to 2025, which Källenius feels will serve Mercedes well when it comes to managing its books.

“The economical proposition of Formula 1 is improving and with the cost cap coming in and turning the team into something that can actually start producing cash flow as opposed to consuming cash flow is very real," said Källenius. "It feels tangible."

While the economics look more favourable with regard to the team, Källenius added: “On the powertrain side that is not yet the case."

Mercedes is one of four power unit manufacturers on the grid, a figure that will drop to three from 2022 when Honda departs at the end of this season.

As well as producing power units for its own cars, the German manufacturer supplies Williams, Aston Martin, and from this year, McLaren.

Despite its position as one of the 'big teams', Källenius claims Mercedes is one of the loudest voices for "reducing cost and keeping things sensible". He added: “Mercedes has also been one of the drivers, even if we are one of the big teams from a gross point of view, a bigger budget.

"We are one of the ones that say 'Let’s stay sensible', and I have also been an active advocate for reducing cost and keeping things sensible.

“We are not yet at a plus-minus zero from an overall point of view, but if you look at the media value and the technical value that we get out of this sport, and I look at how little we actually spend net, it is already today a very attractive proposition and it is going to get better still.”

Mercedes team principal Toto Wolff added: “With the cost cap coming in, the business case has changed completely for us.

"We still need to subsidise the power unit department and the power unit company so this is something we need to look at in the future but definitely we are looking at a very positive future for Formula 1 as a sports franchise."