What is an F1 Cost Cap? Why was it introduced?
F1 introduced its first set of financial regulations for 2021 to encourage a more competitive championship.
The hope was that by enforcing spending restrictions, F1 would help level up more arenas by allowing them to have fewer resources to compete in a more equal environment for teams with huge budgets.
Some teams were previously known to spend more than $400 million per season.
Another main goal behind implementing the budget cap was to ensure that sports could be economically endured.
CAP works by limiting the amount that F1 teams can spend during the calendar year, avoiding spiral costs.
Teams who commit the crime of overexpenses face penalty.
How much is the cost cap?
Originally, the budget cap for 2021 was set at $175 million, but that was reduced. $145 million The focus is on the need for Formula 1 to cut costs to help teams struggling as a result of the Covid-19 pandemic.
The cap has been reduced to $140 million There are plans to further reduce restrictions in 2022 $135 million Until 2023 to 2025.
These numbers are based on a season of 21 races and will be adjusted accordingly, with an additional $1.2 million allowance added to each race that exceeds that threshold.
The FIA agreed to a 3.1% increase in the cost cap in 2022 due to the impact of inflation on team budgets.
The 2026 cap is $215 million To accommodate high Audi salaries in Switzerland.
The new $215 million figure includes some items in the new cap that was previously exempt.
What’s under the cost cap?
Expenses that fall under the cost cap include:
- All parts of the car (from handle to wheel nuts)
- All the necessary elements to drive a car
- Most of the team staff
- Garage equipment
- keep
- Transportation Cost
- Everything in between
What are the cost caps not included?
Expenses that do not fall under the cost cap include:
- F1 driver salaries
- 3 top staff wages
- Travel expenses
- Marketing expenditure
- Property and legal costs
- Admission and license fees
- Non-F1 or Road Car Activities
- Parents’ vacation and sick leave payments
- Employee bonuses and staff medical benefits
How did Red Bull break the rules? How were they punished?
The FIA discovered that it committed Red Bull’s crimes for “minor” overexpenditure on its $145 million budget in 2021, but Verstappen concluded its 2022 title. Team principal Christian Horner argued that excessive supply would not affect their performance.
Red Bull was hit by a $7 million fine and a 10% drop in the 2023 aerotest as punishment.
Thirteen areas were “misinterpreted” by Red Bull, which includes staff catering.
Red Bull ruled in 2023 despite the punishment, leading to Lewis Hamilton criticism.
“There are probably people who want it again and know that they’re just slap them on the wrist.”
Why were Honda and Alpine fined for violating engine caps?
Honda and Alpine/Renault were fined for procedural violations of the FIA Engine Cost Cap Rules.
Honda had to pay $600,000, but Alpine was fined $400,000.
Japanese manufacturers were unable to report accurate reports.
The Alpine fine was slightly smaller due to delays in submitting the FIA document.
“The CCA (Cost Cap Management) confirms that both Alpine Racing SAS and HRC are known to be procedural violations, but neither of them exceed the cost cap level.”
“Both Alpine Race SAS and HRC have always been in good faith and are currently working with the CCA to complete the issue. Given the nature of the violation, the complexity of the new financial regulations of PU manufacturers, and the complexity of the challenges associated with the first year of implementation, CCA is intended to propose that CCA approve the agreement (ABA).”
The engine cost cap is $95 million (2022-2025) and rises $130 million From 2026.
How can a team save money?
Teams are already forced to cut staffing levels to save.
Christian Horner revealed that Red Bull must make more than 90 people redundant, but Mercedes fired 40 staff.
The team must also consider potential accident damage.
One of the most effective cost-saving measures is to reduce development and reduce manufacturing times.
Lewis Hamilton claimed that if Mercedes spent more than $300,000 on upgrades such as “new floors and adaptive wings,” it would have won the 2021 world title.