In the world of Formula 1, the recent rise and remarkable success of McLaren has brought the concept of the customer back into the limelight. This particular term, originally coined by the legendary Enzo Ferrari, was used to describe competing teams that did not manufacture the entire racing car entirely in-house but rather relied on externally sourced engines or components supplied by third-party manufacturers. This business model, once considered secondary or inferior, now appears to be functioning extremely well and producing competitive, even championship-winning results in the modern era of Formula 1. The current regulatory environment, which has allowed McLaren to maintain consistency in their car design and operations, will culminate this year with a final season of regulatory stability. This stability is expected to solidify McLaren’s position as a dominant force, with the British team aiming to successfully defend the Constructors’ Championship title they impressively secured last year. Moreover, McLaren is also in contention to claim the Drivers’ Championship title, which would be their first drivers’ title in 17 years, something that Lewis Hamilton famously achieved back in 2008 when driving for the team.
This situation presents what can be described as the McLaren paradox, an intriguing phenomenon that invites serious reflection on the evolving business and competitive models within Formula 1. The last time the English team clinched the Drivers’ World Championship was indeed when Lewis Hamilton secured the title in 2008. The current technical regulations, which will be retired and replaced at the end of this ongoing Formula 1 season, have effectively favored teams that do not manufacture their power units entirely in-house. For example, Red Bull, which is powered by the turbo-hybrid power unit developed and supplied by Honda—now operating under the rebranded name of Honda Racing Corporation, has thrived under this framework. Similarly, McLaren, which functions as a customer team, uses the Mercedes-AMG F1 M16 E Performance 1.6-liter V6 turbo hybrid power units, benefiting from the technology of a major works manufacturer without developing the engine themselves.
Starting with the 2026 Formula 1 season, a significant change will take place in the power unit supply landscape. Both Red Bull and its sister team, historically referred to as Toro Rosso and now known as the Racing Bulls, will be utilizing the brand-new generation of Power Units 2.0. These new power units will be produced in-house by the Powertrains division based at the Red Bull Technology hub in Milton Keynes, United Kingdom. Although there will be a continued technological partnership with the American automotive giant Ford, this collaboration will primarily focus on supporting specific manufacturing processes, including additive manufacturing techniques (also known as 3D printing) and stringent quality control measures. The sheer scale and ambitious scope of this power unit development project, which had been overseen and driven forward by former team principal Christian Horner and his technical leadership team, invites a crucial question: what is currently the best and most effective business model for competing successfully in the modern era of Formula 1?
A few decades ago, the idea of a manufacturer providing the exact same specification of their power unit to an external customer team would have been considered almost unthinkable. This was especially true if the manufacturer was actively engaged in the Formula 1 World Championship with their own official factory team. During that era, major automotive manufacturers had practically unlimited budgets and the capability to develop multiple power unit specifications in parallel, catering differently to their works team and various customer teams. However, the introduction of cost controls, budget caps, and the freezing of power unit development have resulted in some unexpected and paradoxical situations, one of which is being realized with full merit by the McLaren team based in Woking, United Kingdom.
The cars painted in the iconic papaya orange shade have dominated Formula 1 races and championship standings for over a full year, all while utilizing the same power units supplied to the official Mercedes works team. The talented engineering team at this historic British outfit has demonstrated extraordinary expertise and ingenuity by designing an aerodynamic package that optimizes thermal management and heat dissipation for the power unit, which is developed in the Mercedes technical center located in Brixworth, England. This aerodynamic efficiency in managing the thermal load of the Mercedes power unit has provided McLaren with a tangible competitive edge on the race track. This scenario is understandably a source of some embarrassment and frustration for Toto Wolff, the team principal of Mercedes, who faces the unusual challenge of watching a customer team outperform his own factory team cars.
Looking ahead to the 2026 Formula 1 season, the new technical regulations will mark a significant shift, as they are designed not to penalize but rather to support the so-called customer teams—those racing teams that lack the enormous financial resources, the extensive technical know-how, or the infrastructure required to build a Formula 1 car entirely from the ground up in-house. McLaren currently represents the quintessential example of a winning business model for such customer teams. They have unequivocally demonstrated that a customer team, even without producing their own power unit, can realistically aspire to and achieve any result on the Formula 1 grid, including top-tier championship contention. This successful approach has already been quickly imitated by Alpine, the French-based racing team, which decided to abandon its strict national identity and become a customer team by adopting Mercedes power units.
In fact, starting next year, the Renault group’s Formula 1 racing program—which includes the Alpine F1 Team—will switch to the second-generation Mercedes power units. On paper, constructing the entire car in-house should facilitate better interoperability and integration between the various complex subsystems that compose a modern Formula 1 car, including chassis, aerodynamics, suspension, and powertrain. Nonetheless, Zak Brown’s McLaren team has conclusively proven that it is entirely feasible to develop a championship-caliber racing car project even without having internally designed the power unit and the auxiliary systems that accompany it. This fact will become even more significant once the new technical regulations fully come into effect.
Ferrari, the most prestigious and historic team in Formula 1, is looking to overturn and challenge this prevailing trend. Being a customer team of an official power unit supplier will no longer be viewed as a disadvantage in the near future. Although Toto Wolff, the Austrian team principal of Mercedes, is clearly displeased with the recent successes of McLaren, he has nevertheless refrained from imposing vetoes or restrictions on other teams interested in accessing and utilizing Mercedes power unit technology. To fully appreciate the risk taken by Toto Wolff, it is instructive to imagine a hypothetical yet plausible scenario.
Consider, for example, the possibility that teams such as Haas or Cadillac might manage to outperform Ferrari’s own racing cars while using the Scuderia Ferrari power units. Although this scenario currently appears less likely, it is not entirely impossible given the rapid evolution of technology and team performance in Formula 1. Red Bull Racing, with its newly established and growing Powertrains division, and especially Ferrari—which has not secured a Drivers’ World Championship title for 18 years—will be adopting a fundamentally different business model compared to the reigning world champions.
It is true that for Ferrari, starting from scratch and designing the entire car, including the power unit, presents a more complex and difficult challenge due to the necessity of designing a fully integrated Formula 1 car from the chassis to the powertrain. However, at the same time, this approach holds the promise of a significantly higher potential return on investment with the new generation of power units. Ferrari will be able to exert a more direct and immediate influence on the car’s development and performance within a context where there will be ample room for significant advancements and improvements. The upcoming Formula 1 regulatory framework will offer enormous margins for development and optimization, making Ferrari’s integrated design approach potentially more rewarding and successful in the long term.
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