Good news for COTA

As expected, the United States Grand Prix at the Circuit of The Americas in Austin has been saved thanks to state government action in Texas.

The race was put into doubt last winter when the promoter failed to file all the necessary paperwork to qualify for the reimbursement of tax revenues that has been used to fund the race in recent years. This cost a whopping $25 million, which meant that the race was struggling to pay the required fees.

The problem became public after a leak in the local Austin newspaper and the Governor’s Office said that, because procedures had not been properly followed, the payment could not be made. The only solution was to pass a bill that would make it possible to reapply for the reimbursement. This was put forward by a Republican Representative called John Frullo and passed through the House of Representatives and will now go through the Texas Senate before the session ends on May 27. It was fortunate that the state government was in session because that happens only once every two years.

Frullo said that he backed the bill because it made no sense to lose the Grand Prix as the result of a technicality. The race will go ahead on November 3 in Austin.

Source:JSBL

Formula E: The $900 Million Racing Series That Has Lost $167 Million In 5 Years

Formula E remains loss-making with its annual results for 2018 showing a loss of $29 million. This is the fifth consecutive loss for the electric racing championship, bringing its losses from 2014-2018 to just short of $167 million.

However, the series has been generating more and more revenues with the 2018 total being $149 million.

This is a big leap forward compared to 2017’s $103 million and is largely the result of the new 10-year deal with Saudi Arabia, which is believed to be worth more than $25 million per year.

The results are promising if one considers Formula E as being similar to a technology start-up, with the primary goal being to add value to the business, even if it is making losses as it grows. It remains to be seen whether it can maintain the revenue growth and keep the manufacturers involved. Traditionally, racing championships tend to suffer from boom-bust cycles with manufacturers arriving, fighting and then departing if they cannot win. This also tends to push up budgets which generally results in smaller operations being driven out of the competition by the big spenders.

The series has achieved a great deal in terms of new ideas and getting racing into urban areas, but it is significant that F1 is now looking at going down a similar path and is seeking to promote its environmental credentials in order to get to better urban venues.

The car industry has jumped on the electric bandwagon, in part as a reaction to the damaging Volkswagen scandal, but it is still not clear whether electric cars are the way to go in the short- to mid- term, as hybrid technology (as used and pushed forward by Formula 1) is seen by many as being a better choice because of the slow development of batteries and the investment required in putting in electric infrastructure, while hybrid cars use the existing facilities. There are also questions about the CO2 output of electric cars , as the manufacturing of batteries must also be taken into account.

While Formula E does produce some good racing, the cars are heavy and not very quick, although the big positive this year is that the mid-race car-switch has finally disappeared.

When all is said and done, however, Formula E is largely owned by John Malone’s Liberty Global and Discovery Channel, sister companies of Liberty Media, the owner of Formula 1.

So Malone has both bases covered for the future...

Source: JSBM 18-19

2018 McLaren’s financial results

McLaren’s financial results have made for interesting reading of late, with the company announcing that it had revenues of $1,643 million in 2018, up from $1.132 million in 2017, an increase of 45 percent, thanks to road car sales that leapt from 3,340 in 2017 to 4,829 last year. There was particularly impressive growth in China, which was up 141 percent, with the Asia Pacific region up 57 percent, Europe up 43 percent and North America up 42 percent.

However, when the various divisions are considered separately, there was a rather shocking story with McLaren Racing recording a drop in revenues of around $172 million, compared to the previous year’s $272 million, a drop of $100 million, or around 37 percent. This was caused by the loss of prize money, sponsors and specifically financial support from Honda. There were increased costs as well with the need to buy Renault engines. This meant that despite the sale of “heritage cars” (worth $13 million), the team ended up with a loss of $125 million.

In the overall scheme of things, the company continued to invest in new model development and now employs 3,800 people.

The word in F1 circles is that the team owners (primarily Bahrain’s Mumtalakat investment company, which owns 57 percent of the shares) wants to stop the losses and produce better results in 2019.

Source: JSBM 18-19