F1 Vs FE - The future belongs to...

By : Darren Heat

Funny place, the Formula 1 paddock. Too-cool-for-school, testosterone-fuelled blokes all high on their own supply, convinced they’re immeasurably cleverer than you. Some are, many are not. Collectively ‘we’ travel the globe gleefully pronouncing our ‘informed’ opinions to anyone who’ll listen.

We still believe we’re all young and fresh faced but the sad fact is we’re not. The F1 paddock is a rapidly ageing place with a certain dinosaur-like defiance to the prevailing mood of our time.

As the world embraces hybrid and electric-powered vehicles, and governments line up to invoke internal-combustion-engine-ending legislation, keen to exhibit their ever-so-on-trend ‘green’ credentials, the direction of travel is clear to see. Trouble is, many big beasts of Jurassic Park F1 are blind to the mood!

Formula E is on the rise. Electric cars are the future. Sure there are issues concerning battery life, hardware manufacturing contradictions, cost of delivery, etc, but with the collective will of the best minds in the automotive world these issues will surely be tackled soon.

You don’t need to be a crystal-ball-gazing sooth-sayer to see what’s happening. Look at diesels.

Foolishly and naively trumpeted – 25 years or so ago – by the EU, certain car manufacturers and the tree-hugging lobby as the way to go, this flawed fuel technology is now (at last) revealed to be the filthy, cancer-inducing, foul-smelling excrescence anyone with an ounce of sense always knew it was. Those seen driving one of these soot-emitting, lung-clogging relics of the recent past will surely soon be judged as pariahs of our age.

The standalone internal combustion engine is certainly next.

So where does Formula 1 position itself? Embrace the incredible advances in hybrid power produced by the geniuses we have working in our sport? You may be aware of one of the most efficient racing engines in the world, ever. It’s not some power unit of the distant future, no; it’s the engine currently powering Lewis Hamilton to his fourth drivers’ world title. Approaching the 50 per cent thermal efficiency barrier (the white-coat-wearing boffins at Mercedes High Performance Powertrains’ base in the English countryside have actually surpassed this figure with a dyno-mounted unit), the apparatus that pushes Lewis and Valtteri along is an engineering marvel.

As you will no doubt be well aware, thermal efficiency has become the key focus for modern engine builders, and is calculated on the amount of mechanical energy produced from a given amount of heat input.

In the little over three years since the F1 hybrid age began, efficiency rates have rocketed. The Mercedes unit now – allegedly – produces 109bhp more power for the same amount of fuel than it did in 2014. I’m sure you’ll agree that that’s an incredible improvement.

Over the Singapore Grand Prix weekend much paddock chat was dominated by talk of engine deals for now and the upcoming seasons. Excitable gossip and speculation focused on the possible options for the new engine formula to be introduced for 2021.

Blah, blah, blah, the dinosaurs were making plenty of noise… “Screaming V12s are the way to go”, “ear-splitting V10s for me”, “Let’s get rid of these whispering hybrids”, “Formula 1 should rebel against the mood…” On and on they carped.

And, my learned friends, precisely which automotive giants and reputation-and-perception-obsessed blue-chip brands are going to stump up the cold hard cash to fund your entirely fossil-fuel-burning formula? My heart sinks…

Talk of Aston Martin, Cosworth and the like is all very well, but if F1 hopes to build a global audience on the backs of the US and Asia it’s going to need the clout of big manufacturers and not niche players. Perhaps F1 needs to condense and focus on a smaller, more engaged market rather than ‘bigger is better’.

While F1 fusses over four engine manufacturers, Formula E welcomes Porsche, Audi, BMW, Jaguar Land Rover, Mercedes, Renault, et al. The list will undoubtedly grow. Japanese car manufacturers will surely announce entries soon – they cannot afford not to.

Like it or loathe it, Formula E appears to be on an inexorable rise in importance and relevance. City centre electric car racing that’s on a dizzying upward curve.

I love F1 – I adore the sound of a screaming V12 Ferrari engine, a fuel guzzling mid-80s turbocharged monster, a Cosworth DFV on the downchange. But we simply can’t stop what’s coming.

With the world now driving – quietly! – and at an ever increasing speed along an electric avenue, Formula 1 simply has to be relevant. Rejecting hybrid technology will be the death knell of the sport.

A few years ago one of FIA President Jean Todt’s leading lieutenants leaned in close, looked me in the eye and opined in a hushed and ever-so-slightly chilling tone:

Never forget Darren, “Formula E is our championship.”

I understood his quiet message then and am hearing it ever louder now…

Threesome Red Bull, Honda and Porsche

To those who watch racing the idea of Red Bull switching to Honda in 2019 makes nose sense at all. Surely, they say, it would better with Porsche. Perhaps it would, but that really depends on the ambitions of 73 year old Dietrich Mateschitz and his advisor 74-year-old Helmut Marko. The ambitions of older folk tend to be a little different to those of younger generations with things like becoming a grandparent, living by the sea and retiring being fairly popular. The most popular ambition in surveys is to travel the world, while those who have travelled the world often just want to stay at home. Very few people list administering a vast business empire as one of their ambitions when they are old. The F1 world has looked at what is going with Red Bull and have concluded that Mateschitz's addiction to Formula 1 is over and that now he would sell his teams and to look to other ideas. Mateschitz's team dominated F1 from 2010 to 2013, winning four Constructors' and four Drivers' Championships. The team has won 53 victories, although only six of them have occurred in the last four years. His company has revenues of $6.7 billion a year, which increases moderately each year.

Mateschitz has expressed his discontent with F1 on several occasions but he did a deal to stay in the sport until the end of 2020, and if he leaves before then, he has to pay $100 million a year for the remaining years. That is $300 million if he wants to walk away. Engines are expensive and he couldn't get a factory one. Thus the Honda deal makes enormous sense because if he has three seasons with Toro Rosso getting free Honda engines and two seasons with Red Bull Racing getting free engines, he is saving himself more than $100 million. There is still a possibility that his teams will win races, but as we have seen in the last four years it isn't easy, even with Adrian Newey and two drivers with the talents of Max Verstappen and Daniel Ricciardo.

It is known that Mateschitz would love to sell Scuderia Toro Rosso, because it costs him more than Red Bull Racing, but finding a buyer is tough. With Honda joining the team, there is the possibility that one day the team could be sold to the Japanese. And Red Bull Racing? Well, if you believe paddock jibber-jabber Porsche is interested.. Christian Horner says that is not true. When asked about a Porsche deal he said: "there will be another announcement coming soon that isn't Porsche or Honda."

It might be Honda for a year or two in the interim because the answer to Mateschitz's problems could well be Horner. He's 43, has run the team that won eight titles for 12 years, he has an OBE and is married to an ex-Spice Girl. He has big ambitions. The word is that he was recently in Zurich meeting potential investors and one can imagine that he is probably proposing a management buyout to Mateschitz. He can keep the price down by offering free Red Bull signage on the cars for another three seasons, giving Mateschitz the coverage he wants at no cost. Such a deal would enable Horner to do a lot of things: retain Adrian Newey by offering him cars to design and shares in a team, and the chance to run an Aston Martin team. Horner likes Aston Martins (as does Newey) and there have even been rumours that in addition to running a team for Aston Martin, he might even try to buy the whole car company and become a modern day version of Sir David Brown. That is not as daft as it sounds. Building up Aston is a challenge which few investors relish. And having a successful F1 team could work wonders for the Aston brand. The problem is getting there.


The answer lies, probably, in an engine deal that is under discussion between Horner, Cosworth, Aston Martin and McLaren. They all want to have F1 engines and they all see the new rules as an opportunity. If they worked together, invested together and produced a competitive engine, within sensible rules, they could all walk away with a competitive unit. McLaren could use it as a McLaren engine, Cosworth as a Cosworth and Red Bull as an Aston Martin. 

Cosworth is doing quite these days with annual sales in 2016 of more than $50 million. Leaving F1 cost it a lot of money and it wants to go back and it has a board of clever people who know how F1 works, including former FIA advisor Alan Donnelly, McLaren's Zak Brown and former Williams CEO Adam Parr, not to mention Carl Peter Forster, a former head of Opel and Tata Motors. The company has order books exceeding $350 million and works with Aston Martin as the manufacturing partner with the V12 engine used in the Valkyrie.


"Our five year plan is to double the business again," the company says. "One of the benefits of operating in the automotive tier one supply business is that you have to work hard to earn the contracts, but the ones we have in the order book run until 2025 and 2026." The company also has Bruce Wood in charge of powertrain, who has been with Cosworth since 1987 and is a racing man, notably in Indycars.

Source: JSNL
 

Silly season speculations...

This is the season of pure speculation in Formula 1, if one looks at some of the stories to be found on the internet. It reads sometimes as if the bottom-feeders, committed to providing x number of news stories a day, are simply linking every driver with every seat that is available…

In reality, the silly season is largely hot air, with few major changes expected between now and next year. It looks like Sergio Perez will end up at Renault, Pascal Wehrlein at Force India, if the team can be convinced to take him, and Charles Leclerc at Sauber. Williams will likely remain unchanged unless the team can find someone over 25 who is better than Felipe Massa – and who hasn’t already been and gone from F1. Hence the recent Kubica stories.

Fernando Alonso will stay at McLaren if Honda leaves. We do not expect to see Fernando opening any Honda dealerships any time soon and the Japanese are unlikely to welcome him into one of its Indycars any time soon. The fact that Takuma Sato last week announced he was leaving Andretti Autosport for Rahal Letterman Lanigan Racing, suggests that’s Michael Andretti’s recent negotiations with Chevrolet did not go down well in Japan, even if Michael has now re-upped with Honda. The Japanese are big on loyalty…

The big question in F1 is what happens at Honda and I have a theory about this. Honda is a listed company. There are rules it must follow and keeping decisions quiet is frowned upon by stock market regulators. Honda was due to have a board meeting on Monday night to discuss F1 and the fact it is now Wednesday, heading towards Thursday in Japan, would seem to suggest that the board has made a decision which did not need to be announced. 

Logically, that would that it will stay in F1, rather than quit. That may not be the case, but listed companies tend to make announcements quickly. The board was keen on reviving the McLaren-Honda legend of 1988-1992 to give itself more appeal in the car markets, but it seems that this choice is no longer available, as McLaren is intent on termination and a switch to Renault for 2018, 2019 and 2020. After that it is expected that the team will build its own engines for the new F1 rules in 2021. This may seem tough on Honda, but it is fair to say that the Honda engines have been a massive disappointment.

McLaren feels it must make the change just as back in 2008 Honda felt it must quit the sport. As it turned out that was not a great decision as the team was sold to its management, with sufficient money to avoid all the termination costs that would otherwise have been incurred. Honda then had to watch as Brawn GP won the world title, using a Honda chassis and Mercedes engines.

No announcement suggests no pullout and one might assume that work is now ongoing to complete a deal with Red Bull to supply Toro Rosso in 2018 and Red Bull Racing in 2019 – if things go well in the first year. The deal would be financially advantageous to the teams – in other words they would save Red Bull a ton of money. You might ask, why would Red Bull care about cash? 

Well, there is a school of thought in F1 that is arguing that Red Bull boss Dietrich Mateschitz has had his fill of F1 and wants to move on to new dangerous activities to keep Red Bull edgy for the next generation of adrenaline freaks. He is contractually committed to F1 until the end of 2020, with massive penalty clauses if he pulls Red Bull Racing out before then. 

This could cost hundreds of millions of dollars and so the best strategy is to stay involved, take the prize money on offer (which is why there are penalty clauses) and reduce costs as much as possible by doing deals for the remaining years. The TAG-Heuer engine branding deal is just such as arrangement, while the Aston Martin sponsorship deal looks more like an exit strategy, with the team becoming Aston Martin-owned in the long term. 

Obviously Aston Martin is short of cash, but royalty deals on the (Red Bull-designed) Valkyrie supercar project justify the signage on the F1 cars and a Red Bull fade-out, with the Austrian firm remaining the title sponsor for three years, but paying nothing in 2021, 2022 and 2023, means that the purchase price can be made much more manageable.

This probably explains why Christian Horner has become such a convert to cost-cutting and cheaper engines in the future, in expectation that he will lead (and be a shareholder in) an Aston Martin F1 team, securing Adrian Newey’s services with shares, as well. Thus if the Honda engine is decent and there’s money behind it, that would get Red Bull Racing through 2019 and 2020, at much reduced cost.

If one looks at Red Bull’s sister squad, Scuderia Toro Rosso, it is already known that the team is for sale. Almost half the operation now works in the U.K. And the team recently re-signed James Key, to maintain the value in the business. Getting Hondas in 2018, 2019 and 2020, would get the team to the end of the current commercial agreements and ready for the new era of F1 in 2021. The relationship with Honda would be good for whoever owns the team by then and would add value to the team if the Honda engines become competitive. 

A similar Red Bull fade out sponsorship in 2018, 2019 and 2020 would mean that the price could be reasonable for any buyer out there and while moving the whole team to England might not be desirable for the folks in Faenza, it does make sense, although these days teams can be a little more multinational, as we see with Haas, which has designers and manufacturing in Italy, research and development and marketing in the US, and the race team in the U.K.

The key to these moves is a sensible set of cost-effective rules for 2021 and beyond, but these seems to be in the pipeline. If the costs can be brought down and the revenues pushed up then more manufacturers will come to F1, which explains the Porsche and Alfa Romeo stories of late. Others may follow…

 by Joe Saward