Reducing engine costs may not be feasible

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We stated this months ago when the concept of simply telling engine manufacturers to charge less for their supply contracts came up. That’s a lot easier said than done and now Mercedes boss Toto Wolff has weighed in on FIA president Jean Todt’s idea of exactly that:

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“Mr Todt wants to try to reduce the engine prices for the customers, the smaller teams because they are quite a large chunk of the overall budget and we take it very seriously,” he said.

“We’re looking into things. Unfortunately the situation is we’ve set up a business case with these engines with an underlying investment.

“We acknowledge it’s an important bid, so we are sharpening our pencils and looking into the situation.

“We’ve promised to come back with an answer as to whether this is feasible or not.”

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It’s not easy, as we mentioned back then, to simply forget your business model for the product developed. It is a combination of expenses that are then offset through engine supply contracts and increased earnings due to more Formula 1 Constructor’s Championship points which pay out millions.

Just like track economics for circuits who host F1 races being critical, so too is team economics (obviously…not trying to patronize you here) and it would not be easy to simply return to 2013 engine supply contract amounts.

Could Mercedes sharpen their pencil and take a bit of a haircut on the deal? Sure, but we’re talking about a very large number and I’m not sure a 3-5% reduction is the type of savings Todt is looking for.

Time will tell but things just simply just become less expensive. It takes time for the amortization of the engine R&D and as the regulations remain stable, the price will come down but with talk of big changes for 2017, this may be even more money for an engine so we’ll have to cross our fingers.

Hat Tip: AUTOSPORT

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BasCB

Hm, not quite sure, but from reading how Toto worded his view, I would think it rather means that Mercedes is open to talk (and agree) on some kind of cost cap. Then again, If the FIA states 12 million, isn’t that more than Mercedes currently asks (I think they start at 11 million, while Renault tops the market at 17 million)? Or is one number per car and the other per team (that would make sense, 22million for Mercedes package). It still means that such a cost cap will likely be the the final drop for Renault to pull… Read more »

Tom Firth

It’s amazing how much you have to sharpen a pencil to write ‘no’ these days isn’t it? I suppose no one uses pencils enough to have some sharpened.

What’s more amazing is that Renault are charging the most, for the least competitive package.

Paul KieferJr

We used text on computers these days.

jakobusvdl

I’ll bet Bernie is still no stranger to the pencil ;-)
Its not really amazing about Renault charging the most. Under the last p.u format they were consistently the most successful and they were reputedly the supplier pushing hardest for this new format. So it’s not surprising that Renault could charge a premium for their new format p.u’s.
I agree that it is pretty disappointing that they haven’t been competitive (though you’d have thought their customers would have negotiated contracts had a performance component)

Fred Talmadge

I vaguely remember, maybe mistakenly, that in flat track motorcycle races you could buy the winners engine for $500. Put a couple of 0s behind it and bamo! engine costs reduced.

FerrariF1fan

Anyone else getting visions of the scene in Godfather 2 when the bosses are dividing the country and in the end say “after all, we are not communists”. That’s kind of how I see a meeting between Bernie and the F1 engine manufacturers going.

Will Irwin

It should be possible to come up with a scheme where the more successful teams pay more for the engines, and the less successful teams correspondingly less. And before someone says that is rewarding failure, isn’t the same model applied to the fees that teams pay to enter the championship?

Andreas Möller

From what I’ve heard, at least last season the Mercedes PU was not the most expensive one – not even by a longshot. Back then, Renault and Mercedes both supplied the same number of teams, so they had equal opportunity to spread the costs. Even so, the Renault was significantly more expensive than the Mercedes. If one were to speculate, it could possibly be because Merc – iike Ferrari – have their own-branded racing team, which allows them to write off some of the cost as marketing for their owners. Renault F1, meanwhile, may well be subject to fiscal demands… Read more »

Paul KieferJr

Yanno, a lot of these engine cost reductions could yhappen if they just simply go with the engine (and maybe the CE). Keep it Stupid Simple.

jakobusvdl

I know that it is a really dumb question, but how did F1 paint itself into this position? The new P.U’s were a massive engineering challenge, with about a 1 in 4 chance of developing a competitive and reliable unit . Then compounding the difficulty with the sinking lid limits on components for the season, and limited in season development. How the teams wound up being the party paying for that, without any additional compensation for the extra costs, just highlights how poorly structured F1 finances and politics are. Then having created the problem, the FIA now want the suppliers… Read more »

Tom Firth

I would go into a whole response but I can probably sum up how in saying “Arrogance, Ignorance and Greed”

jakobusvdl

Its a bit frustrating, isn’t it?
Particularly when all the attention goes on the bit of F1 that fundamentally isn’t broken.

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