F1 | Mercedes: turnover of over 500 million, but profits falling

F1 is continuing to expand and, in the same way, team turnover is also increasing. For example, the company that runs Mercedes, Mercedes-Benz Grand Prix Ltd., declared last year's turnover of £546.5 million, relating to the calendar year ending December 31st.

This is an interesting figure, not only because it represents an increase of £71.9 million when compared to the 2022 figure of £474.6 million, but also because it gives an idea of ​​the parameters of stable expense. To give a term of comparison, Red Bull Technology, the company that manages the Formula 1 team of the well-known energy drink brand, had recorded a turnover of around 385 million pounds in 2022, the latest data available.

However, despite the increase in turnover, the Brackley team recorded a slight decline in profits, down to £83.8 million compared to the £89.7 million declared in 2022 and it is interesting to understand the combination of factors behind to this loss. More specifically, this is related to the increase in operating costs for last season and the payment of higher taxes in 2023.

In fact, observing the data relating to the development of the single-seaters, the amount spent rose from 41 million pounds in 2022 to 52.2 million last year. Clearly, beyond the financial statements, in F1 it is also linked to the budget cap, which is why it must comply with a certain spending threshold set by the International Federation.

This figure, approximately 11 million higher than in 2022, includes part of the investment necessary to turn around the fortunes of the 2023 project, which was modified during construction after a disappointing start. Furthermore, to be able to fix the weak points of the W14 project, in view of 2024 the team redesigned not only the chassis, also following a different path from the past which required new studies, but also other components, including the front suspension and rear, the gearbox and some components relating to the steering which in the past created vibrations. Clearly these additional expenses were then reflected in the team's accounts.

Mercedes also recorded an increase in staff, up by 175 units: if in 2022 there were 1114, last year the team closed on December 31st with 1289 people. An increase in staff which, clearly, also partially weighed on the total salaries of employees, which increased by almost 30 million, going to 111.7 million compared to the 82.1 million declared in 2022.

Part of this figure, however, is also due to various bonuses: as Toto Wolff himself explained at the end of last season, for achieving second place in the constructors' championship behind Red Bull there was also a bonus for employees, which was not unlocked in 2022 when the team stopped in third place behind the same Anglo-Austrian team and Ferrari.

Mercedes logo on a team truck

Photo by: Steve Etherington / Motorsport Images

Some fiscal elements external to the team also came into play in the calculation of the final profit. For example, there was an increase in the corporate tax rate by the government to 25% in April 2023 compared to 19% in 2022, which cost Mercedes, as well as all other teams that have a tax headquarters in Great Britain, a significant increase in terms of expenses, which rose to £32.5 million in 2023.

While Mercedes ended 2023 in second place in the F1 championship behind Red Bull, improving on its 2022 performance, it saw a decline in television coverage due to fewer podiums. In fact, in the marginal notes explaining the data, as happens with all reports, the Brackley team explained that television coverage recorded a decline of 14.7% last season and this is largely due to the fact that the team finished fewer times on the podium than in 2022.

However, there are also positive factors: “The cumulative advertising value equivalent (AVE) remained important for business partners and shareholders, at $5.3 billion. The team continued to grow strongly on social media, with a cumulative number of followers of 36 million (+15%) and a total of 465 million engagements (+9%)”, reads the press release, which also takes into account of these elements, in order to understand the growth and value of the brand. In fact, in a quote reported in the documents, it was made known that Forbes estimated the value of the team at 3.8 billion dollars in July 2023.