Could the cost cap stop teams from racing?

By capping costs, teams will have to be more creative in order to remain competitive and reduce the gap between their budgets.

Formula One, the home of speed, is a very interesting yet expensive sport. For this particular sport industry to reach its epitome of success, the administration has to make hard decisions, particularly in finances. Money is very important in Formula One sports and if misused, can lead to bankruptcy in the organization. On the Bright side, Formula One has a financial mechanism which helps manage these huge amounts of money.

 Unfortunately, sometimes F1 cost cap has to undergo hard decisions which dictate the fate of a team, the million-dollar question is can Formula One cost cap stop teams from racing? 

One may ask himself/herself why F1 has a budget cost cap. Some teams have huge budgets, while others have fair amounts of money. This tends to relate with the performance on the racetrack also known as the circuit. Teams which have higher amounts of money are already a step further than the other teams, as the 'richer' teams are able to upgrade their teams and make them faster.

If these are not controlled, it will be unfair for the 'poorer' teams as they will be no match for them. Therefore, F1 Budget Cost Cap was constructed in order to make sure that there is fair competition and to manage finances of teams. It was introduced to make F1 sports more equal and an interesting racing event. 

Just like the final match of the World Cup in 2022 between France and Argentina which kept the heartbeats of the fans hyper, Cost cap seeks to produce unpredictable racing to make the tournaments interesting and entertaining. There are advantages that have sprouted since its beginning, and one of them is that the spending limit promoted and influenced stable funding.

As alluded in the introduction, Formula One is a very expensive sport. The racing cars require a huge amount of money to be purchased and maintained. For example, the steering, which though appears small, is very expensive. It is small and extractable, going for respectively $70,000 to $100,000 in US dollars.

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However, there are steering wheels which are more expensive than this which can do a better job than the other ones. Teams may be tempted to over spend on the car accessories and surpass the F1 cost cap budget, but this will result in F1 cost cap taking disciplinary measures.

Some of these measures may include stopping the team from racing. For example, racingnews365.com states that, "Potential penalties for Red Bull in the overspend range from ultimate disqualification from the 2021 championship, although this is highly unlikely." 

The team, Red Bull, was guilty for breaching the F1 cost cap budget, and it became vulnerable to disqualification, therefore showing that F1 Cost cap budget can stop teams from participating in the racing events. If a team has surpassed the budget cap by less than five percent, the team can be punished for the next season where their finances have been audited. 

The guilty party can be penalized for future seasons through limitations when testing, such as amount of time in the wind tunnel. Limitation of time in the wind tunnel is a big disadvantage, as time in the wind tunnel helps the team to find better ways to improve the car, increasing the chance of winning a race. 

In the Wind tunnel, the aerodynamics, which is a study of air motion, are examined on the car checking the downforce which gives the car grip in corners and the drag which allows the car to go faster on straight laps.

Therefore, if disciplinary measures by F1 budget cost cap are taken to reduce the team's time in the wind tunnel, then this will reduce the team's chance of winning a tournament, thus losing a lot of money that will have been invested. With such a measure being exercised by F1 budget cost cap, it is with no doubt that the Cost cap can definitely stop a team from participating if they surpass the budget.

Formula One racing teams originally have huge budgets but even with this provision, they tend to overspend and so it leaves a question mark on why they overspend. For example, Red Bull has a budget of about $145 million, but on some occasions will overspend. There always seems to be greener pastures on the other side, even when their financial status is already healthy. For instance, if Red Bull overruns its budget by respectively 2 million, this means the number of employees can be increased and specific parts on the car can be upgraded till it's in today's language ‘top-notch ‘. 

Although this sounds like an advantage to Red Bull, it puts the other teams in a crucible or rather disadvantage if they do not have finances that level up to Red Bull.  In a nutshell, a Cost Cap can stop teams from racing. However, this is determined by the height of breaching the budget has gone.

The penalties that can be exercised upon guilty parties/teams are similar for both minor and major rule breakages, the teams will be vulnerable to being excluded from races, subject to fines and their wind tunnel testing will be limited. If the team has overspent by more than 5% of the Cost cap budget, there are high chances that it can be kicked out of an entire world championship. 

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