The issue has polarized the teams, with Alpine and Alfa Romeo being the ones that have spoken the most about it so that the rule that stipulates that the maximum that can be spent during a season is 140 million dollars (about 130 million euros at current exchange rates), plus an additional 1.2 million dollars for the 22nd date. Meanwhile, Red Bull, Ferrari and Mercedes have led the lobby towards the FIA for a raise, with requests becoming more common as time and global inflation have progressed.
All the teams agreed to the reduction of 175 million dollars (just over 163 million euros) after the COVID-19 pandemic, at a time when it was not clear what kind of year we would have and how much income they would obtain. Just a couple of courses later, there is already a calendar full of fans and with several circuits fighting to be in Formula 1, which translates into financial health for the category.
In this context, it’s no wonder that the big teams are frustrated that they can’t allocate more funds to create faster single-seaters because they have to balance their costs. Red Bull boss Christian Horner suggested in Barcelona that several teams would have to miss some races to get below the cost cap, although in Monaco he clarified that he was only trying to give an insight into how many teams expect to break the cost cap.
There is obviously some logic to the inflation argument, but how significant it should be, how it should be applied, and what kind of precedent it would set in terms of further increases in future years, are questions that remain unanswered.
The most important thing is the principle of limitation, and it must not be forgotten that several teams and their owners have made a long-term commitment to maintain maximum expenses, without creating a dead-end investment fund. Instead, Formula 1 would focus on cost efficiency and the effective use of resources, which could give the more backward teams a chance to join the midfield and perhaps contend with the big boys.
The leaders of Renault were committed to the Alpine project, while those responsible for Haas and Finn Rausing of Sauber/Alfa Romeo justified their participation knowing that, in theory, they could compete with the most powerful. So it’s totally understandable that those sets are now trying to stay within the limit and are worried about any kind of modification.
The two camps have very different views on the impact of inflation and how it should be viewed, with some arguing that it was known to come and others blaming the conflict between Russia and Ukraine .
“Obviously, there are a couple of teams against it,” Horner said. “And I think the voting process within the budget cap season changes requires a certain threshold that doesn’t exist now.”
“But, of course, you have to see the big picture. Is this a force majeure event? I would say that a war that has affected inflation will be described as such,” said the Red Bull chief executive.
Alfa Romeo director Frédéric Vasseur responded: “It is not at all a case of force majeure, because inflation is not. We knew perfectly well in October or November, when we did the budget thing, that there would be inflation, and now the teams They are the ones who have to decide if they want to develop the car all season and miss four races, or if they prefer to slow down and finish the year.
“Honestly, I think at some point we have to agree that we’re not going to try to change the norm,” he continued. “It was exactly the same story with weight, some didn’t make it, and the number of teams was enough to modify it when they didn’t make it. It’s not a cliché, that if you have eight cars underweight, after qualifying , those eight will be disqualified.”
Vasseur’s argument is that the teams can always stop development : “The difference is that we are not talking about the budget ceiling, but about the budget, on our part. It means that I will not be able to spend what I have, and if we have a raise, I can understand the situation, but if it is in transport, for example, the best solution is to stop running the wind tunnel so as not to bring updates every weekend”.
“We are in this situation, and sooner or later we will have to stop the development of the car, because we will be at the limit of our budget, and I think that everyone can do the same,” he said.
Alpine boss Otmar Szafnauer staunchly defended his team’s position and, like Vasseur, claimed that inflation could have been taken into account long before the start of the season.
“Most of the teams make their budgets in November or December, for the following year, and we are no different,” he said. “And at that time, inflation was already at 7% or more. The RPI [retail price index] in England was 7.1 or 7.2%, we took that into account when we came up with our budgets and setting up all the development work that we were going to do.
“And we’re still in it, although travel cost was a little more expensive than we thought, and we’re still under the cap. We plan to be there by the end of the year, and we’ll adjust development accordingly, as Fred said [ Vasseur], so I think it can be done,” he explained. “Where there is a will, there is a way, and we set a budget ceiling that we must stick to.”
Szafnauer insists that the rules must be followed: “We sat for a long time trying to get the cap to be the right one. We discussed inflation, there is a mechanism in the cap itself to deal with it, and I think you have to stick to the regulations we have.
“The big teams had a different opinion about where the maximum should be, the smaller ones wanted it at 100 million dollars [just over 93 million euros],” he said. “We made a compromise, including inflation, what we do with that, and the first time we’re up against, which is a little over two-and-a-half percent, and we want to change that.”
“I think that’s a mistake, and I think we should stick to the rules as they’re written, and see this through. I don’t think it’s opportunistic for teams to say ‘don’t change the rules in the middle of the season.'” , the Romanian pointed out.
Some adjustments that do not have to do with the budget ceiling figure are also being discussed. One of them is to exclude the limit on some, even all, of the travel costs, freeing up sums that would be included in the 140 million dollars and used for other purposes. With consecutive races and several one-week breaks, this would be very useful for the teams, who could save money.
Teams that buy components from rivals have to declare a theoretical value for them, what it would have cost them to develop and build them in-house. Although it doesn’t help big boys like Red Bull, his boss, Christian Horner , suggested some of those values would ease the pressure they feel.
“For the little ones, there are things the FIA can do,” he said. “The components that are transferred, for example, the gearboxes, the suspensions or some others, carry a substantial increase, some taxes at the cost limit, not real money.”
“Perhaps that is something that the federation could study, in revaluing them, because it is the teams that, even being seventh in the championship, are looking to see if they violate the budget limit due to effective taxes,” said Horner.
As stated, these adjustments won’t help the top three teams in trying to stay under the cap. In reality, the only solution will be an agreement between all the teams on a change in the main figure, presumably in negotiations with Formula 1 CEO Stefano Domenicali and FIA president Mohammed ben Sulayem . However, that seems to be a long way off, as the rivals refuse.
Ferrari chief executive Mattia Binotto is clearly frustrated, suggesting the teams now blocking the switch are not playing fair after the big boys indicated some concessions were necessary.
“I would like, once again, to reinforce whatever the situation is, small, top-tier teams, which is a sense of responsibility that we all have with the regulations and Formula 1,” he said. “As I think we had at the time, in 2020, when they cut us from 175 million to 145 million.”
“Of course the frontrunners weren’t interested in going down to 145, it would have been so easy for us to just stop it and keep 175, and there would be no discussion today,” added the Swiss director.
“I think we made an effort, because we understood the importance of it. We understood the importance of trying to balance a little more the cap and the financial situations of the teams,” he continued. “But I think that, as we did at the time, now we are experimenting with the rules, we know where the limits are, what needs to be improved.”
“And I think as a community everyone should understand and be responsible. If a team just looks at its own individual interest, we will never move forward. What we as Ferrari accept, even in 2020, is to freeze the regulations when we knew our car was bad, and we put all the criticism on our men during the season”, assured Binotto.
“But we did it out of a simple sense of responsibility. If someone doesn’t do it today when there is a situation like this, which is force majeure, which is obvious, that everyone can understand, I wouldn’t understand it,” he concluded.
