2021 season with 2020 cars?
No races, no income: The F1 teams will soon hardly get any money from the rights holders. That could put some racing teams in need. And the postponement of the new regulations until 2022 has long been discussed.
The coronavirus crisis is also a financial crisis. Worldwide, share prices are in free fall. Liberty’s Formula 1 stock is no exception. It fell from $46 on February 20 to a low of $18.30 on March 17 in just 27 days. The reason is obvious: no races, no money.
The entry fee for the Grands Prix of Australia, Bahrain, Vietnam and China would have washed up a total of around $ 150 million. Now there is zero income. Apparently the following deal has been closed with the AGPC in Australia. Each party remains at its own expense. The Australians on their organizational and construction costs, Formula 1 on the lost entry fee.
Even from Bahrain, Vietnam and China, money will only flow when the races actually take place. That is why none of the Grands Prix has been officially canceled, just postponed, with the hope of having them on the calendar sometime later. Liberty also has to accept losses in TV contracts. Depending on the equipment, the TV channels get a discount if there are no races to broadcast. This hurts rights holders especially when it comes to Sky England, the largest net contributor. Without a race there is no income from the Paddock Club or from the event sponsors.
Liberty needs to correct payout
This is very bad news for the teams. Rights holders only get money from March to December. Almost 67 percent of the total income is distributed. It begins in March with the final settlement for the previous year. If Liberty’s estimate of annual earnings was too high, the last installment will be lower, otherwise payment will be made later.
During the season, a monthly installment payment flows according to the 2019 distribution key, but based on the estimated earnings for 2020. And Liberty has to correct it dramatically downwards. Bitter for the F1 teams: Even the team sponsors only pay for Grand Prix that take place.
The teams are therefore hurt by the lack of income. Your costs continue to run as usual. It doesn’t matter whether you have 240 employees like Haas or 1,000 like Mercedes. Small teams could soon be in need of existence if only small amounts were paid out in the next three or four months. Large teams are no longer profitable. This is particularly important in times when automobile manufacturers are also under pressure on the auto market. Mercedes and Renault expect their Formula 1 teams to at least cost no money.
90 percent of the teams would agree to postponing reform by 2022
The longer the process of uncertainty takes, the worse it gets. The program in the technical departments is only running with reduced power anyway, because you cannot try planned upgrades on track. Every further development step is therefore associated with the risk that it will arise on the wrong basis.
In a conference call with Formula 1 boss Chase Carey, nine out of ten teams agreed to homologate the 2020 chassis, transmission, and parts of the suspension by the end of 2021. Only the development of aerodynamics would be optional. That would save the teams a lot of money.
Only Ferrari disagreed with the idea. The Maranello team asked for time to think. Because of the dramatic coronavirus situation in the country, Ferrari is currently under massive pressure. Nobody knows how long the factory has to remain closed, regardless of the early summer break. Only one thing is certain: Ferrari will also lose a lot of money.
A decision may already be reached at another conference call on Thursday. And it could look like this: In order to save teams from bankruptcy, the 2021 season would be driven with the 2020 cars and the new regulations would be postponed to 2022 by one year.
This would save the teams from building new cars for one season and allow them to concentrate fully on aerodynamics development. And they would have more time to prepare for the major regulatory reform, which will not start until 2022. Racing Point team boss Otmar Szafnauer replied when asked: “Given the dramatic situation, there is actually no other option.”
This solution would also make it more flexible to rearrange the calendar. If the start of the season should not take place in Baku as hoped but later, the 2020 season could extend until January 2021. The unusual races in the southern hemisphere could all be packed into the winter. The new season would then continue in April 2021.
Chance to lower the budget cover
The postponement of the technical regulations should have no influence on the budget capping. The spending barrier should come next year anyway. It even has to. It could be a golden opportunity for the FIA and rights holders to convince the teams to dramatically push down the $ 175 million cost lid and its many exceptions.
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