There are some sports that don’t require a penny to play. Running, swimming and wrestling come to mind.
Motorsport – and Formula 1 in particular – has always been the antithesis of these. By its very nature, large sums of money are also required to create a single grand prix.
Most of the drivers come from rich families (or connected to them), without which they would not have entered the world of motorsport. The cars themselves represent the pinnacle of automotive technology and are made by brands eager to prove theirs is the best. This is a battle that cannot be won on a small penny.
However, as every common household on the planet is discovering in this historical period, a small sacrifice can lead to a great saving. The words sacrifice and savings, however, are not part of the team principal’s vocabulary, but regulations can force them to tighten their belts. And while those rules came to Formula 1 much later than in many other sports, even compared to other motorsport categories, they are now an important part of the game.
What is the budget cap in F1?
The F1 bug cap limits the amount a team can spend on their cars over the course of a given calendar year and went into effect for the first time in 2021. The original plan, drawn up before the pandemic arrived, included a spending cap of $ 175 million, but when COVID-19 compromised the 2020 season, throwing some teams into a desperate financial situation, the cap was reduced to $ 145 million.
The plan called for a further reduction of $ 5 million per season for 2022 and 2023, with minor inflation changes to be adopted later. However, these have already begun to apply following the rampant price increase that hit the global economy during 2022.
Kevin Magnussen, Haas VF-22 in the pit lane
Photo by: Glenn Dunbar / Motorsport Images
Why does F1 have a budget cap?
Some teams have huge budgets, while others are content with relatively modest sums. These differences tend to be related to track performance and make it nearly impossible for the poorest teams to catch up in terms of speed.
The budget cap is above all a long-awaited attempt to level the playing field but also to ensure that enough teams survive to make up the grid. Furthermore, in a world where the emphasis is on savings and sustainability, it is also a step in the right direction for the image of a sport that many consider sinfully wasteful.
What is in the F1 budget cap?
Any expense related to the performance of the car, but not the engines, is relevant to the budget cap. This includes:
- All components of the car (from the steering wheel to the wheel nuts).
- All the elements necessary to operate the car
- Garage equipment
- Spare parts
- Transport costs
The area of greatest attention is that relating to the development costs of the car, with teams having to evaluate what is being developed, how much is spent on each individual part produced and how many parts are needed and can be produced without spending too much.
![Mercedes W13, engine detail](https://cdn-3.motorsport.com/images/mgl/0mbgvqa2/s8/mercedes-w13-engine-detail-1.jpg)
Mercedes W13, engine detail
Photo by: Giorgio Piola
What’s not in the F1 budget cap?
There are several important things that are not covered by the budget cap, including:
- Salaries of pilots
- The salaries of the three highest paid staff members
- Travel costs
- Marketing expenses
- Property and legal fees
- Registration fees and licenses
- Any activity not related to F1 or road cars
- Payments for parental and sick leave
- Bonus for employees and medical benefits for staff
The engines, which are the most complex part because some teams build them while others buy them, are covered by their own cost regulations.
What are the penalties for violating the F1 budget cap?
Beyond the procedural offenses related to reporting, there is a clear dividing line with regards to budget cap transgressions: exceed the established amount by 5%. Below this figure, the overrun is officially defined as a “minor offense”.
If it is exceeded, however, the teams are in the territory of the “material overspend”, but there is a lot of confusion about the applicable sanctions. Expenses are a complex area to regulate once you get into the details, so the rules have been deliberately written to allow for case-by-case punishment.
For this reason the wide range of possible penalties that can be imposed is similar for both minor and major infractions: point deductions from the 2021 season, exclusion from racing, fines and limitations on wind tunnel tests.
There is, however, a fundamental difference if you have exceeded the budget cap by more than 5%: you can be excluded from the world championship.
Who decides the penalties in the event of a breach of the F1 cost cap?
The sanctions will be imposed by the Cost Cap Adjudication Panel, a group of six judges proposed by the FIA and the teams.
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