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