Throughout 2023, there was much talk about CapEx, which is the part of the budget available to each team, excluded from the Cost Cap, to be invested in improving their facilities. However, there currently exists a technological gap between various teams. Hence, it was decided to grant a higher spending limit to the bottom-ranking teams to try to get closer to the top teams. Let’s explore how CapEx works and what is changing for the coming years.
During the recently concluded season, teams extensively discussed the topic of CapEx, the portion of the budget available to each team, excluded from the Cost Cap, aimed at making investments to enhance their facilities. The regulations indeed outline different sections regarding expenses incurred throughout the year, distinguishing between OpEx, generally known as the budget cap, and CapEx.
According to the financial rules of F1, initially, it was decided to give equal opportunities to each team, without differentiating the budget available, as is done, for example, for the number of hours in the wind tunnel. In an attempt to rebalance the grid and provide more opportunities for bottom-ranking teams, a system regulating aerodynamic development has been in place since 2021. This system is updated every semester, both concerning the time spent in the wind tunnel and simulations in the CFD. The world champion team has the least time available, with the allocated hours gradually increasing from team to team up to the last team in the championship.
However, while theoretically starting fresh each year with a new car, there is already an existing gap in various aspects, both in terms of personnel and technology. This is because, before the introduction of the cost cap, top teams made significant investments by updating their systems, such as simulators or machinery, to have the latest technologies.
Team Requests
An issue of which the FIA and Formula 1 are aware, leading to the inclusion of a section in the financial regulations dedicated to investments in new facilities that would not fall under the Cost Cap, namely CapEx (Capital Expenditure). Initially, it was decided to guarantee a figure of $45 million excluded from the Cost Cap. However, according to some teams, this amount would not be sufficient to narrow the gap between top teams and those at the bottom of the standings.
James Vowles has been vocal on this issue since he arrived at Williams at the beginning of 2023. He analyzed the facilities available to engineers to understand which areas needed investment. For example, the former Mercedes man was surprised that the Grove team could not rely on an ERP, a system that helps track design progress and the use of various parts.
Among its various uses, it helps understand more easily which elements have covered fewer kilometers than other parts that have a longer life. However, this is just one area where the British team lags behind the competition, requiring significant investments to close the gap with the competition, now possible with the arrival of Dorilton Capital.
For this reason, Vowles has tried in every way to push the issue to give the team a broader margin to update the facilities at the Grove base, now obsolete or with many years behind them. On the other hand, rivals have greeted the request with some skepticism because it would represent a competitive advantage. They have tried to secure higher quotas for their benefit. Other teams are also expanding, such as Sauber, Aston Martin, or Alpine, with the latter recently acquiring a new simulator that will be operational in the coming years.
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In the mid-year meeting of the F1 Commission, Vowles had reopened discussions but did not find unanimous support from other teams. For example, Zak Brown, CEO of McLaren, had explained that he was understanding towards Williams’ situation. Still, it needed to be analyzed cautiously because the risk was to open Pandora’s box. Based on Williams’ request, other teams had started pushing for facilitations. Therefore, figures of $90 million were touched upon, well beyond the initially set $45 million.
Throughout the rest of the season, attempts were made to find a solution that could satisfy everyone, an aspect far from simple given the economic demands put forward by various parties. In recent months, various options have been discussed because the main problem was that granting the same extra limit to all teams would not have completely filled the gap in terms of facilities. This is because even top teams could have updated areas where they felt they were lacking.
How the Updated CapEx Will Work
Within the financial regulations, the maximum CapEx figure indicated for each year is actually a total for the reference season and the previous three seasons combined. The issue is slightly more complicated because the figure is not fixed and has changed over time. Taking a draft of the regulations from the beginning of last year as a temporal reference, it can be noted that for the period until December 31, 2023, and 2024, the maximum figure was $45 million. In contrast, from 2025, that amount would drop to $36 million, indicating that teams would have to deal with a lower spending threshold.
However, after the last meetings of the F1 Commission in 2023, the Capital Expenditure functioning system underwent several changes. The FIA and the teams finally agreed on a spending table that effectively divides the grid into three classes, using the results from the 2020, 2021, and 2022 championships to determine the order. This system somehow mirrors that of restrictions on wind tunnel usage, with the difference that there are three different classes containing more teams instead of a progressive scale for all 10 teams.
As established earlier, the initial CapEx figure for the 2024 season was $45 million for each team. This represented the maximum expenditure for the years 2021, 2022, 2023, and 2024 combined. However, this figure was revised based on the table that divides teams into three different tiers.
For first-tier teams, namely Red Bull, Mercedes, and Ferrari, this figure has now increased to $51 million, giving them $6 million more to invest than initially expected. For mid-tier teams, namely McLaren, Alpine, and Aston Martin, the total spending has increased by $13 million, reaching a total of $58 million.
Instead, the four teams in the last tier, namely AlphaTauri, Sauber, Haas, and Williams, have been granted an additional $20 million compared to what was initially expected, reaching $65 million for the reporting period ending on December 31, 2024. This means that these teams can invest more significantly in new equipment during this season. Additionally, this increase represents a net gain of $14 million in terms of spending compared to the top three teams, creating a real opportunity for them to reduce the gap in terms of infrastructure and performance.
The situation will change again with 2025. For the four reporting periods of 2025, 2026, 2027, and 2028, the overall amount will be further revised downwards. The increases granted will remain the same for the three classes, but the starting point will change. Instead of the $45 million set for 2024, it will start from $36 million
, which was initially planned for 2025. Top teams will have $42 million at their disposal, six more than expected. Mid-tier teams will have $49 million, while the four teams in the last tier will have a total of $56 million.
After this period of extra spending, starting from the reporting period ending on December 31, 2029, all teams will return to the same level, with a total of $36 million for that year and the previous three combined. Therefore, unless further intervention occurs in the future, teams will have the same amount of money to spend outside the Cost Cap.
Teams’ Opinions: For and Against
As in any game, some feel they have achieved a victory, while others are not satisfied. Although those extra $20 million do not represent the figure Williams was aspiring to, the team can undoubtedly look to the future with more confidence, given the opportunity to spend a little more not only compared to top teams but also compared to mid-tier teams.
“It’s good news, from my perspective, in any case. The good work done with all the teams has allowed us to unlock an exemption in our favor of about $20 million. Now we have CapEx to spend, maybe not the $100 million I was looking for, but it’s a good step in the right direction. The teams at the top won’t get as much as those at the bottom. We all benefit more, which is in line to some extent with the structures,” said Williams Team Principal James Vowles, welcoming the agreement positively.
McLaren’s Head, Andrea Stella, has also supported the additional spending, which will help the team improve the factory. It is essential to keep in mind that the Woking team has invested significantly in recent years behind the scenes to reorganize and modernize its facilities. In addition to a new wind tunnel and a new simulator, which recently became operational in the last months of the year after the necessary calibration period, the team has adapted its old factory where the new composites department will be located next to the warehouse that handles spare kits and garage parts to be shipped around the world.
“First of all, I would like to emphasize that it has been a positive process in which the teams and the institutions that conducted the process managed to reach an agreement. For us, this is good news; we will use the extra funds. So, I think it’s a good thing for us,” commented Stella.
However, not all teams have welcomed this regulatory change positively, especially because it represents a change from the initial plans. For example, Frederic Vasseur has expressed skepticism several times, both before and after the granting of the extra budget. On the one hand, there is the fact that since its introduction, the Cost Cap has already seen several changes, both to adapt to inflation and other rising costs. Still, there is a fear that by making continuous changes, it can lead to a situation that is difficult to control.
“I’m not very convinced. First of all, if you ask your engineers if they want to get more, they will always say yes, we want to get more. It’s an endless process. And I think we’ve opened the door a couple of times to change cost cap regulations, and this is very dangerous,” Vasseur had stated.
Peter Bayer’s reasoning is also interesting. He joined AlphaTauri as CEO in 2023 after working for a long time at the FIA, also participating in the drafting of regulations. Bayer has emphasized how this change in regulatory terms has been rather sudden, and not all teams will be able to fully exploit the extra budget guaranteed by the new regulations, having to revise previously established plans.
“Having participated in the development of the cost cap, the idea was to ensure that all teams fit within a certain number or had the chance to reach it. Now, regarding OpEx [the Cost Cap], we have an inflation indexation; regarding CapEx [Capital Expenditure], we have another increase, and although it’s nice in principle, at the moment, we don’t have the money, so I have to try to find the money with sponsorships. It’s challenging because you’re making a plan and deciding your investment, and then suddenly, within six months, the regulations change, and you have to go back to your shareholders,” added the AlphaTauri CEO, who from the next season will assume a new name affiliated with new sponsors.
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