With Formula 1 looking to cut costs and even the playing field financially, budget caps are a hot topic. With 2022’s team spending limited to $140m, dropping to $135m in 2023, other currently unregulated areas of spending such as the drivers’ salaries have also been thrown into the conversation. F1 Feeder Series explores the domino effect this could have for those drivers hoping to make to the pinnacle of motorsport.
By George Brabner
Cash is king
Drivers who look to climb the junior categories all start their careers in the same place: karting. Making it to the grid even at a basic level is no easy feat – the driver or their family has to muster up all of the running costs of a racing team, and that’s not cheap. The kart itself, the fuel, the tyres, damages, and so on means costs stack up fast.
Toto Wolff, team principal at Mercedes-AMG Petronas Formula 1 Team, has referenced a karting season to costing as much as $250,000, and as many drivers lack personal wealth to pour into racing, talents are lost before they even step into a kart because someone’s bank account has a few too little zeroes. Picking up sponsorship is a must for any junior driver in 2022.
Once a driver is out of karting the road to Formula 1 is a long and expensive one – we’ve seen time after time money coming first even outside of the junior ladder, as hugely talented young drivers are pushed aside for a sweet dollar. Speed is just not enough.
The ultimate goal
Looking at Formula 2, for example, there are a lot of liveries you will have seen before, as Formula 1 teams such as Red Bull Racing, Williams and Alpine pour money into young drivers to try and develop their talent. Other top contenders are almost bound to bring huge sponsor stickers to their car: the entire top 5 in F2 right now all have companies taking over parts of their car. A Formula 1 team helps propel your career, but it doesn’t run the show for you behind the scenes.
Sponsors put faith in the budding young talent in front of them in a bid to make a financial return. Ultimately, an investor isn’t going to fork out $1 million for a season in Formula 3 if they don’t believe their driver can make it further up the junior formula ladder, because otherwise, the profit margin won’t rise with them.
In the event a junior driver does make it to Formula 1, the investor is the one ultimately victorious. They’re likely to see a full return, but a proposed salary cap will only make the investment opportunity that is motorsport all the uglier. If the investor can’t make their money back, what’s the point in sponsoring a young driver anymore? Navigating your way up the feeder series ladder is already hard enough, let alone if a salary cap is put into place that makes paying for a career more unattractive.
What an F1 salary cap would initially mean
The skyrocketing prices of putting together a 22-race Formula 1 season are trying to be dialled back by the FIA in a plethora of ways, however, one of these ways changes more than the eye can see. Max Verstappen is rumoured to have signed a deal with Red Bull Racing where he earns an estimated $55 million per season, the salaries of him and other drivers are in the firing line as a way to reduce spending and it’s being backed by superpowers in the sport such as Mattia Binotto and Christian Horner.
The idea behind an F1 salary cap is to stop teams from spending huge amounts of money on their drivers as way to lower the entry bar for new teams and make the sport more competitive. It sounds good on the surface, right? However, that’s easy for us to say.
For the drivers themselves, it’s not exactly a welcomed deal for just as many reasons as it could be helpful. That, in reality, is not the issue we are here to discuss, though.
An investment is only a good investment if it earns money. However, by capping the return a backer can earn means they suddenly see themselves cornered – they really would be just losing money for the sake of it by backing a junior driver.
Furthermore, the changes in F1 could well trickle down to other, junior FIA-sanctioned series’, which would only compound the problem of stopping investment early in the racing ladder. Suddenly, entering motorsport is even harder for someone without a billionaire family. Everyone loves the rags to riches story of drivers such as Esteban Ocon in the modern day, but hurting investment returns with a salary cap is due to revert racing to the societal elitist sport of the 1950s.
The F1 salary cap has more to it than just drivers getting angry they aren’t earning as much money as they’d like. One decision by the FIA will send drivers toppling out of junior series’ in one big chain reaction, as all of a sudden the big background question has an answer: “Should we invest in a young driver? No, we won’t get a return.”
An F1 salary cap would rip the incentive to sponsor a young driver through the ranks away, reducing the already minimal opportunities a more financially modest driver-in-the-making has. With Formula 1 already labelled as a billionaire boy’s club by Lewis Hamilton, the reasons to bankroll a driver into the sport and through the junior ranks just get slimmer and slimmer.
An F1 driver salary cap is only loosely in discussion though, so fear not, disaster isn’t on the horizon just yet.
Header photo credit: Formula Motorsport
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One thought on “How an F1 salary cap could impose financial hurdles on junior drivers”
Joe Saward has a different take on this. He argues that as long as the teams give up the driver’s NIL (Name, Image, Likeness) rights, drivers will have even more incentive to make more entrepreneurial moves to capitalize on their story and performance thereby potentially not limiting their income.