KNUTSON: Cost Cap Coming To F-1

Formula One will enforce a cost cap starting with the 2021 season. (Steve Etherington photo)
Dan Knutson.

An annual budget cost cap for Formula One teams has been argued about for years, but it will finally become a reality in 2021, when a team will be limited to spending “only” $175 million a year.

The 2021 FIA Sporting and Technical Regulations will have a new branch called the Formula 1 Financial Regulations, which will enforce the budget cap rules.

However, this figure does not include engine costs, marketing or drivers’ salaries, so the teams can still payout out about $250 million. Only Ferrari, Red Bull and Mercedes — who spend $300 to $400 million a year — will have to trim their spending.

Even though they don’t spend that much, some of the smaller teams welcome the cap because they simply can’t afford to try and compete with the big three.

“There is a reason the top three have catapulted away from us,” noted Racing Point team principal Otmar Szafnauer.

When it comes to closing the gap between the teams, the best way to do it is to quit fiddling with the technical and sporting regulations, Mercedes team boss Wolff believes. Both those areas are set to undergo a big overall in 2021.

When the rules are changed, the wealthy teams have more resources to find the best solutions.

“The default reaction in the past, when a team, or three big teams are running away, is that we change the regulations,” Wolff said. “Because you believe that by changing the regulations others may catch up. Exactly the opposite is the case: if you leave regulations alone, which is counter-intuitive, eventually performance converges.”

A good example, Wolff pointed out, is the power unit regulations – which have been mostly unchanged since 2014. Mercedes started out with a huge advantage, but now Ferrari, Renault and even Honda are closing in.

Szafnauer also favors stable regulations.

“The curve to catch the big teams is steep in the beginning, but then it flattens out,” he said. “The smart guys, the rich guys, the fastest guys … they will win anyway, but the margins will be smaller.”

Over the years Formula One has never been able to stop changing the rules, but the plan from 2021 onwards is that the big teams won’t be able to spend vast quantities of cash on those changes.