Audi Sees High Formula 1 Costs As Parent VW Seeks Efficiencies
Audi’s spending on Formula One will stay high after a peak in 2026, potentially putting the brand’s presence in the high-stakes sport at odds with saving plans across parent Volkswagen AG.
(Bloomberg) -- Audi’s spending on Formula One will stay high after a peak in 2026, potentially putting the brand’s presence in the high-stakes sport at odds with saving plans across parent Volkswagen AG.
The bulk of expenditure will go toward a competitive chassis and motor, Audi Chief Financial Officer Jürgen Rittersberger said Tuesday, before the team starts to compete in 2026. VW’s premium brand this month moved to fully control Switzerland’s Sauber Group’s F1 team to accelerate joining the racing circuit.
Costs will stay high for continual development, Rittersberger said, amid operational outlays with teams traveling to races across the globe.
Despite the expense of being part of the franchise, F1 has seen a string of deals and a jump in valuations since Liberty Media Corp. took over the sport in 2017 and marketing investments soared. Popularity in the US has taken off after the success of the Netflix documentary series .
“With the introduction of cost caps, specifically with it comes to the development of the chassis and motors, F1 is significantly more planable,” Rittersberger said. “In comparison to previous years, it’s more affordable.”
Read More: Audi to Fully Own Sauber F1 Team to Accelerate Racing Entry
Canadian billionaire Lawrence Stroll late last year sold a stake in Aston Martin’s F1 team to US private equity firm Arctos Partners, valuing the venture at about £1 billion ($1.3 billion).
F1 podium success usually takes time. Mercedes-Benz Group AG bought the Brawn GP team in 2010 but struggled to secure any major wins in the face of stiff competition from Red Bull, Ferrari and McLaren. The introduction in 2014 of turbocharged hybrid engines in car design regulations - something Mercedes had been long preparing for - allowed them to finally dominate that season.
Read More: McLaren Racing Sees Every F1 Team Worth More Than £1 Billion
VW in 2022 gave Porsche AG and Audi the green light to pursue separate F1 entries in 2022. Investors and car brands are seeking to tap into F1 teams, amid resurging popularity of the sport, which historically used to swap hands for nominal amounts with wealthy racing fans happy to subsidize the costly circuit.
Spending on Audi’s F1 entry will have to jive with Europe’s biggest carmaker’s efforts to boost returns across the group, most urgently at the VW brand as well as Audi. The maker of the Q6 e-tron is seeking a profit margin of 14% by the end of the decade, compared with 7.6% last year, which included negative impacts from commodity hedges.
“There are two hearts and minds” on Formula One, VW CFO Arno Antlitz said earlier this month in an interview. “It’s a great opportunity for Audi but there are costs incurred and we have to compensate for that as part of the efficiency program.”
--With assistance from Oliver Crook.
More stories like this are available on bloomberg.com
©2024 Bloomberg L.P.
