Is £196m a lot of money to spend in F1?

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According to The Independent, Red Bull racing spent £196m on their racing program based upon recent released company accounts for 2013 when the development of their 2014 car was incurred.

You’d have to parse the numbers quite a bit to find the 2014 car costs in R&D and then also look at employee headcount and other expense to accurately get an idea of the total but running the numbers, it seems to be in this neighborhood which is twice what the small teams spend.

You could understand that spending half of this amount would find you at the back of the grid as far as performance is concerned but it does make you wonder how the small teams function and that’s become the biggest current debate in Formula 1 today—the equity of prize-money payouts and the viability of small teams.

As the article points out, the distribution is a sliding scale. You can read how this is estimated to work here.

An interesting note is the amount of money paid into the program from Red Bull itself and the dramatic reduction of funds needed from the owner in order to keep things moving forward. It went from £54m to £13m and that’s a big difference all things considered.

Also interesting is the comment about Red Bull’s spending having increased by £64m and you have to wonder how much of that might have been for the new engine supply and if they helped offset some of the R&D expense of Renault F1 Sport. Conjecture and most likely not but designing a system that would work with the new power unit was certainly expensive nonetheless.

The team’s income is reported as £197m and that’s a tidy sum supported by big payouts from F1’s prize money to be sure. Mr Sylt says the prize money breaks down like this:

“The basic pot is a share of 47.5 per cent of Formula One’s profits, which is divided into two, with one half split equally between the top 10 teams and the other paid to them on a sliding scale, depending on their position in the constructors’ championship. Red Bull Racing also get a share of a prize pot of at least £60m, split between the top three teams based on races won in the four seasons prior to 2012. They lead this group and picked up at least £23m.”

Before you gain an opinion on the equity of this arrangement, you have to also consider the commitment and resources a team like Red Bull, Ferrari or Mercedes have committed to investing in F1 and for how long. It’s not a simple dividing equally model as a team like Mercedes would have little reason for pouring the cash into F1 that they do. It’s complicated and you have to wonder if they will get on top of this situation any time soon—soon enough to save the smaller teams. Otherwise it’s three-car rules for 2015.

Hat Tip: The Independent

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