Formula 1: The cost cap is driving the sport in the right direction

Lewis Hamilton, Mercedes, Max Verstappen, Sergio Perez, Red Bull, Formula 1 (Photo by Daniel Cardenas/Anadolu Agency via Getty Images)
Lewis Hamilton, Mercedes, Max Verstappen, Sergio Perez, Red Bull, Formula 1 (Photo by Daniel Cardenas/Anadolu Agency via Getty Images) /

In 2021, Formula 1 introduced the cost cap in an effort to bring about more competitiveness and make the playing field even amongst all teams.

The Formula 1 cost cap was initially supposed to be introduced in 2020 at $175 million, but due to COVID-19, it was implemented in 2021 and reduced to $145 million. Ideally, the cost cap would decrease over the upcoming seasons and only be altered for inflation.

The cost cap has been beneficial for the sport since its introduction and will drive it in the right direction for years to come. Teams such as Mercedes, Red Bull, and Ferrari will not have the financial advantage they have had in years past.

Additionally, those who do go over the cap will be punished, as Red Bull were for their 2021 breach.

So what factors play into all teams being on level spending grounds?

  • All parts on the car (from the steering wheel to the wheel nuts)
  • All the elements needed to run the car
  • Most of the team personnel
  • Garage equipment
  • Spares
  • Transport costs
  • Everything in between

This has definitely raised the level of competition, as the decisions on where each team chooses to spend hold value, benefits, and consequences. Each decision holds so much value since once that money is spent, the remaining amount decreases.

This has essentially forced teams to prioritize certain aspects of their season over others. Oftentimes, the prioritized aspects are car parts and research into improving the car. These are the most important as well, as they are the biggest determinants of which team’s car will be better than others.

In 2022, the cost cap decreased to $142.4 million, and it has decreased to $135 million for 2023 through 2025. As we move through this season and into the future, it will allow all teams to essentially learn to budget in a way that brings their team the most success.

It will put more stress and importance on teams to keep or increase the reliability in their car, as a failure in parts could lead to unnecessary spending and further consequences. For example, last season, Ferrari had lots of reliability issues, which proved to be a problem. But their efficient research had still given them quite a good car.

Teams that have consistently been on the top will feel the pressure to spend accordingly to maintain their status. On the flip side, teams that are looking to make massive improvements will look to put more effort into the research of the car to fix their issues from the prior season.

This is what makes the cost cap good for the sport, now and for years to come. With no cost cap, the big teams would spend as they please and smaller teams with a limited budget would feel the pressure of those budgeting decisions.

However, that pressure is now felt by all teams when it comes to spending. Formula 1 has done a commendable job in bringing about that equality among all 10 teams. As a result, the competition level rises and makes things more exciting.

Aside from this affecting the 10 teams in the paddock, there are broader implications to having the cost cap exist. Making things more equal between teams allows for greater competitiveness.

This is shown on the track, as the margin between each team’s car performance shrinks. Despite only being one race into the 2023 season, we have seen the rise in competitiveness as a byproduct of the cost cap.

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Additionally, viewership should rise as Formula 1 becomes more appealing to the general public. A rise in ratings and positive viewership numbers are beneficial for the sport as a whole. This is bigger than just the teams, as the cost cap continues to have a global effect.