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Cost cap introduced as F1 details 2021 vision

Image: Formula 1

Formula One and the International Automobile Federation (FIA) have today (Thursday) revealed the set of new regulations that will seek to overhaul the motor-racing championship from the 2021 season, headlined by the introduction of the sport’s first cost cap.

The regulations are two years in the making and have been the subject of fierce debate in the F1 paddock. They have been ratified by the World Motor Sport Council (WMSC) and broadly seek to promote closer racing, more balanced competition and ensure greater economic and sporting sustainability.

The cost cap has been set at $175m (€157m) per year, covering a team’s expenditure which relates directly to the race car’s performance. It will apply equally to all teams and is based on there being 21 grands prix – one fewer than next season – on the calendar. Should there be an increase in that number, the teams will be allowed to spend an extra $1m for every additional race. The figure will reduced by the same method if the calendar is shorter than 21 races.

The cap excludes all marketing costs, race driver fees and the costs of the team’s three highest paid personnel. Teams such as British outfit Williams run Heritage car programmes, which will be excluded along with all corporate income tax and other non-F1 activities. The cost for a team purchasing a customer engine supply deal, which has been capped at €15m per season, has also been excluded.

F1 will regulate the cost cap rules through a Cost Cap Administration, with professional services firm Deloitte appointed to provide independent oversight of every team’s compliance. A trial run of the cost cap will be implemented in 2020, but will involve no sanctions should a team breach the rules.

From 2021, teams must submit an interim account of their spending against the cost cap for the period between January and April by the end of June each year. The annual expenditure must be reported by the end of the following March.

Sanctions for breaking the rules will be split across three categories of severity. The most severe breach will be in cases where teams overspend the cap by more than five per cent. Penalties for breaking the rules will range from fines in the first instance; a ‘minor sporting penalty’ such as deduction of points, race bans or a reduction of the cost cap; through to a material sporting penalty, which can involve all of the above plus exclusion from the world championship.

Another key part of the new regulations will be a radical overhaul of the look of an F1 car. In 2021, F1 cars will feature simplified front wings, bigger rear wings, increased underbody aerodynamics, wheel wake control devices, simplified suspension and low-profile tyres with 18-inch rims.

It’s also proposed that wheel rims will be fitted with a rotating LED display panel, to provide information to spectators, while a bodywork display panel is also proposed for the same purpose. Today’s announcement comes after Formula One and the FIA in July shed further light on the direction they wanted the championship to go from 2021 onwards by revealing the most detailed plan to date of their vision for the sport.

F1’s owners, Liberty Media, first unveiled their 2021 vision in April 2018, with a cost cap and more equal revenue distribution among the host of items on the table. F1 and the FIA today said the regulations, which were unanimously approved, will be married to a new governance and profit sharing structure that will enable the sport to grow and improve while further strengthening the business model. These agreements are in an advanced stage with the teams.

Chase Carey, chairman and chief executive of Formula One, said: “We deeply respect the DNA of Formula 1, which is a combination of great sporting competition, uniquely talented and courageous drivers, dedicated teams and cutting-edge technology. The goal has always been to improve the competition and action on the track and at the same time make the sport a healthier and attractive business for all.

“The approval of the rules by the World Motor Sport Council is a watershed moment and will help deliver more exciting wheel-to-wheel racing for all our fans. These regulations are an important and major step, however, this is an ongoing process and we will continue to improve these regulations and take further steps to enable our sport to grow and achieve its full potential.

“One of the most important initiatives we will be addressing as we go forward is the environmental impact of our sport. We already have the most efficient engine in the world and in the next few weeks we will be launching plans to reduce and ultimately eliminate environmental impact of our sport and business. We have always been at the leading edge of the automobile industry and we believe we can play a leadership role on this critical issue, as well.”

FIA president Jean Todt added: “It is a major change in how the pinnacle of motor sports will be run, and for the first time, we have addressed the technical, sporting and financial aspects all at once. The 2021 regulations have been a truly collaborative effort, and I believe this to be a great achievement.

“A crucial element for the FIA moving forward will be the environmental considerations – Formula 1 already has the most efficient engines in the world, and we will continue to work on new technologies and fuels to push these boundaries further. What the FIA publishes today is the best framework we could possibly have to benefit competitors and stakeholders, while ensuring an exciting future for our sport.”