An outflow of $1.4 Billion towards building up F1 Engines

An outflow of $1.4 Billion towards building up F1 Engines

In order to emerge as the titleholder, a recent study has brought to light that an automaker requires an expenditure amounting to $1.4 billion towards building up F1 engines. 

Despite the upcoming crossroads, two of F1’s four-engine suppliers have found themselves in an uncomfortable position threatening their place in the race series, all this due to the high octane cost. With the looming end to the teams` contracts, FI has used the opportunity to introduce new rules in an effort to intensify the series after a definitive dominance by Mercedes in a six-year period.

Mercedes has been taking the lead in an action-packed series with 73.7% upon the introduction of the current 1.6 liters V6 turbos to F1 in 2014, Ferrari being the runner-up at 14.4%, Renault being the second runner-up at 10.2%, and lastly Honda at 1.7%. 

In a bid to keep the Japanese auto giant in F1, Helmut Marko has asserted that there is room for improvement on the Honda-powered Red Bull. A month ago, Marko alluded that Honda will be turning over a new leaf, characterized by the new regulations imposed. Marko also stated that in order to accommodate everyone, there has to be a significant drop in Honda’s charges, which will in turn ensure that not any team will be left behind. He further expressed his deepest concern over the current engine specifications, which limit the performance of vulnerable teams which aren’t on the same level with Ferrari. Even when FI has introduced the new regulations, the current engine specifications are said to never be altered yet a change in the aerodynamics of the car is inevitable.

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Renault announced that they will be reassessing their affiliation with F1 after plummeting revenue by 1.6% to $12.6 billion. As the main suppliers of engines to more than a third of F1`s teams, given that both Renault and Honda will pull out, this would result in an observable decline in the race series owned by Liberty Media.

The graph below illustrates how Mercedes has dominated F1 since the 1.6-liter turbocharged V6 was introduced. Even though Ferrari, Renault, and Honda trail far behind.

Mercedes has grown in its brand value by $16.7 million since 2013 and hitting a staggering $48.6 billion in 2018 would then place Mercedes as the eighth most valuable brand in the world. In spite of the current brand value, Mercedes has also been technology precocious, moving technology from F1 to production cars. Toto Wolff, the Mercedes team's boss has alluded that the S-class is running on a 6-cylinder turbo engine and in this regard, the efficiency of the engines is maximized including the fact that power deployment translates directly into road cars.

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Mercedes is looking to strengthen forces with F1 due to the upcoming launch of the Mercedes-AMG One hypercar which will have a top speed of 218 miles per hour and a price tag of $2.7 million. Since developments began on the V6 Engines, its costs have come to a total of $1.2 billion. The company’s latest results are for the year to 31 December 2018 and its costs only rose by $4.7 million on the previous year. Given that the trend continues, it will bring its spending over the V6 era to $1.4 billion. 

There has been no other suppliers who are thought to be in the running, so if Honda or Renault disassociate themselves with F1 Liberty, their time could end up in a race against time to replace them.


 


 

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