Formula One is all set to slash the originally set $175m budget cap by another $30m in view of the revenue losses incurred due to the Coronavirus pandemic.
Formula One is inching closer to put a new $145 million budget cap on teams from 2021. Given the current Coronavirus crisis and a massive revenue loss because of 10 race cancellations in this season so far, F1 and FIA have reportedly reached a proposal to reduce the originally set $175 million budget cap for teams by another $30m.
In 2019, Formula One announced a major overhaul in the series, which was to be applicable from 2021. This included a new set of rules and regulations in order to make racing closer as well as to provide a level playing field for all competing teams. A $175m budget cap was also discussed and finalised as part of the new 2021 regulations.
However, in view of the Covid-19 outbreak, multiple race cancellations and revenue losses this year, the new technical regulations have now been delayed until 2022, so as to ease the financial stresses on teams and sponsors. But, at the same time, it was decided that the financial regulations – the $175m budget cap – would still be in place in 2021. This announcement, however, was made a couple of weeks ago.
Now, the latest update is that Formula One is attempting to cut the costs even further by introducing a $145m budget cap instead. The proposal has reportedly been made to all the teams, but it's not confirmed if all the teams have agreed to it so far. However, in an interview with Sky Sports, F1’s motorsports director, Ross Brawn, said that they are at the 'very final stages' and an announcement is due shortly. He also hinted this budget gap may be reduced even further over the next few racing seasons.
The original objective behind coming up with a budget cap was to create a more competitive field, as the top three teams in Formula 1 – Mercedes-AMG, Ferrari, and Red Bull – have an estimated budget of over $400m, while the remaining teams’ budgets' hover anywhere between $140m to $250m. This, of course, resulted in a huge performance gap between the top three and the rest. So, to bridge the gap, a budget cap of $175m was set to be introduced. However, with the Coronavirus pandemic stalling the proceedings, it is only sensible to reduce the budgets even further, as it's now also a matter of F1’s economic sustainability.