Red Bull Has Exceeded F1's $145 Million Cost Cap
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Red Bull Has Exceeded F1's $145 Million Cost Cap
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Hey Friends,
Formula 1 has always been an expensive sport.
The cars alone cost more than $20 million. Luxury brands like Rolex, Richard Mille, and Ritz-Carlton spend millions of dollars annually on advertising. The top drivers (Lewis Hamilton & Max Verstappen) are paid roughly $40 million in salary alone, and the top teams (Red Bull, Ferrari, and Mercedes) have traditionally spent more than $400 million each year in an attempt to be crowned World Champion.
But with such a large gap between the budget of top teams ($400m+) and bottom teams ($150m), this created a scenario where it became virtually impossible for any driver outside the top teams to win a race. So in an attempt to make the grid more competitive, Formula 1 has recently introduced a cost cap — think of it as simply a limit on how much a team can spend on their cars each season.
It kicked off last season at $145 million—teams that spent $400m+ now need to spend no more than $145m—and it’s set to be reduced by $5 million each of the next two years until we reach $135 million for the foreseeable future.
F1 Cost Cap By Season (with the ability to adjust for inflation)
2021: $145 million
2022: $140 million (since altered for inflation)
2023: $135 million (since altered for inflation)
2024 & Beyond: Only inflationary adjustments
But there is just one problem: It’s only been one year, and we already have controversy.
After months of overspending rumors in the paddock and a six-month FIA review, the cost cap administration released news this week that Red Bull breached the 2021 rules with “Procedural and Minor Overspend Breaches of the Financial Regulations” and Aston Martin was in “Procedural Breach of the Financial Regulations.”
That essentially means Aston Martin didn’t fill out their financial forms correctly, probably resulting in a five-to-six-figure fine. But the bigger story here is Red Bull, which won the Drivers Championship last year and was found to have committed a procedural breach and minor overspend — that means they went over the $145 million budget by less than 5% (or up to $7.5m on a $145m budget).
So what’s the punishment? Well, that’s the problem.
The FIA now has the ability (and discretion) to implement a range of punishments, including public reprimands, fines, deduction of championship points, exclusion from races, wind tunnel testing limits, and a cost cap reduction for next season.
What Does The F1 Cost Cap Encompass?
Car parts
The majority of team personnel
Garage equipment
Spare parts
Transportation costs
What Isn’t Part Of The F1 Cost Cap?
Driver salaries
Salaries of the team’s three highest-paid staff employees
Travel expenses
Marketing costs
Property and legal expenses
Entry and license fees
Non-F1 or road car costs
Parental and sick leave pay
Bonuses and employee medical benefits
Red Bull could settle with an Accepted Bread Agreement (ABA), which means they accept responsibility and work with the FIA to determine a punishment. Or they could fight the allegations and leave their fate to the Cost Cap Adjudication Panel — a panel of 6-12 judges elected by the FIA General Assembly.
But I tell you all this for one simple reason: I think this is a pretty big deal, and the punishment should probably be harsher than most people think.
Formula 1 fandom can be strange, and some people seem to get upset for no apparent reason. But this has nothing to do with Red Bull — I would have the same opinion if this were Mercedes, Ferrari, McLaren, Williams, or Haas.
The fact is that the cost cap was implemented for a reason. Take US sports leagues like the NFL, NBA, and MLB, for example. They have all implemented salary caps to create parity amongst the competition, and when someone breaks those rules by overspending, there is a strict system in place that penalizes them (luxury tax).
But secondly, a “minor breach” is not minor at all. For example, a $7 million overspend would still be considered minor under the current guidelines, even though it would provide a significant performance advantage to the team.
"Seven million will be like 70 engineers," Ferrari sporting director Laurent Mekies recently said. "Seventy engineers, they will give you a serious amount of lap time.”
And Mercedes team boss Toto Wolff echoed his comments, saying “I think the word is probably not correct because if you are spending $5 million more and you are still in a minor breach, it would still have a big impact on the championship. We obviously monitor closely which parts are being brought to the track by the top teams every single race in the 2021 season and 2022 season, and we can see that there are two top teams that are just about the same and another that spends more.”
So while I don’t expect the FIA to take away Max Verstappen’s championship—that creates a bunch of other problems and is almost entirely off the table, no matter how much some people think it would be fair—I do expect the FIA to deliver Red Bull a significant punishment.
Teams like Mercedes and Ferrari fired more than 100 engineers last year to get under the cost cap. These rules were implemented for a reason, and it’s not a good look that Red Bull was the only team to exceed the limit while also winning their first Formula 1 Drivers Championship in nearly a decade.
I hope everyone has a great day. We’ll talk tomorrow.
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How 14 Americans Could Destroy the Premier League
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Red Bull Has Exceeded F1's $145 Million Cost Cap
Why do you think taking Max's title away is unfair if his car broke the rules and barely even won it against a car that was in compliance.