Spending by Formula One (F1) teams will be capped at 145 million USA dollars in 2021 with a subsequent limit of 135 million US dollars by 2023, it was announced on Wednesday as the sport's governing body the Fédération Internationale du Sport Automobile (FIA) attempted to stem the bleeding from the coronavirus pandemic. F1 has been financially unsustainable for some time, and inaction would have risked its future.
The rules initially mandated all teams to adhere to a cost cap of United States dollars 175 million (approximately Rs 1,327 crore), but that limit has now been further reduced to USD 145 million (about Rs 1,099 crore) for 2021. First-quarter revenue crashed to $39 million as against $246 million in this period of previous year, according to F1 owner Liberty Media. F1 had debts of $2.9 billion, offset by producing extra liquidity through internal transactions. That will require major sacrifices from the leading teams, some of which are reported to have budgets in excess of $200.More news: Italy’s Serie A Pro Soccer League Sets June Return
Three teams spent less than the new budget cap of $219m, with Williams the lowest spending team, at $199m.
Following a vote of the World Motor Sport Council on Wednesday, the FIA has approved a new cost cap for Formula 1 teams as well as a new sliding scale rule for aerodynamic testing.
Some of these tweaks have been made in order to prevent what the FIA has termed "project flipping", whereby a small team would supply a big team in order to circumvent the cost cap restrictions.More news: Case of coronavirus-related syndrome being investigated in Albertan child
It has been agreed that final championship position will determine how much time teams can spend on developing its vehicle for the year after. Mercedes team has managed to break records galore and has won six drivers' and constructors' championships in the last 10 years.
"A uniform budget cap, in concert with more even distribution of revenue among the teams, will ensure greater competition and more people wanting to watch live and on TV, driving more sustained revenues to underpin the long-term financial health of the teams and the sport".
Ultimateely, the new F1 budget cap should help level the playing field in F1 while making the sport more attractive to outside manufacturers.More news: U.S. consumer spending sinks by record 13.6% in face of virus
F1 is hoping to start the season with back-to-back races at the Austrian Grand Prix in early July, followed by two at the British GP.