Ferrari to consider pulling out of Formula 1

Ferrari’s Chairman Sergio Marchionne has hinted that the Italian manufacturer could pull out from Formula 1 after the end of their contract in 2020. Filings by Ferrari reveal that doing so could save the company around £ 100 million (Rs. 860 crore). Ferrari has been in the sport since the last 67 years and has taken part in all the championships since 1950.

Formula 1 owners Liberty Media are set to change the engine rules and prize money payouts from 2020. The Italian car manufacturer has been present in every season since Formula 1 began. Marchionne said that “(F1) has been part of our DNA since the day we were born. So, it’s not as if we can define ourselves differently. But if we change the sandbox to the point where it becomes an unrecognizable sandbox, I don’t want to play anymore.”

Being the oldest team in Formula 1, the company enjoys a higher share of the payouts to teams. Ferrari is guaranteed an annual bonus of £ 80 million each year for just participating in a season. In 2016, the team was given £ 160 million, 33% more than the Mercedes team, who won the championship. Teams like Manor F1 received only £ 40 million. Formula 1 was sold to Liberty Media in January 2017. They now want to bring equality in the prize money given out as there is a direct connection between this figure and the team budgets.

New engine rules are set to be introduced in 2021. This means additional expenses for engine suppliers like Ferrari. Smaller teams lease engines for a fraction of the cost of development. Ferrari has been unable to win the driver's championship since the smaller 1.6-litre engines were introduced in 2012.

Analysis of filings by Ferrari reveals that the company spends around £ 338 million on research and development, £ 80 million on staff and £ 55 million on running the team. Income for the team comes from sponsorship, supplying other teams with engines and F1 prize money with the total figure around £ 372 million. This leaves a deficit of £ 101 million which is absorbed by the company.

A big reason for Ferrari to participate in Formula 1 was marketing and trickling down of technologies like paddle shifters, carbon fibre composites, and hybrid systems used by the cars on the tracks to the road cars. However, the last driver's championship for the team was won by Kimi Raikkonen back in 2007. Additionally, Ferrari has grown as a brand and no longer needs Formula 1 to improve its brand recognition.

Source - The Independent