Do F1 Teams Make Money?

Do F1 Teams Make Money

Do F1 teams make money? Well, yes and no. In 2021 the big hitters Red Bull and Mercedes made somewhere between $10-20 million in profit, while the remaining eight teams broke even, or at least came close. 

Given budgets in 2021 were around the $450 million mark for the top dogs, you could be forgiven for wondering where all that money went. 

With F1 being the pinnacle of motorsport, it attracts the best drivers, administrators and engineers that money can buy.

Then you need to factor in the costs of research and development, plus the logistics of getting to every race. In 2021 the F1 calendar had 22 races, and that increased to 23 races in 2022. 

The costs quickly add up. 

So with all those expenses to factor in, how do F1 teams make money? 

How do F1 teams make money?

F1 team budgets are derived from several key areas:

  1. Sponsorships
  2. Payments from Formula 1
  3. Pay Drivers
  4. Manufacturers

The most lucrative way for F1 teams to make money is through sponsorships. Second to that is through winnings and incentives paid by Formula 1 directly. Then some F1 team budgets are supplemented by payments from manufacturers, or what’s known as a ‘pay driver’ such as Lance Stroll of Nicholas Latifi

How much do F1 sponsors give?

How much F1 sponsors contribute can vary from as little as €500k to as much as €50M a season in what is a bit of a catch-22 season. The more successful the team, the more sponsorship revenue they can ask for, but to be successful, they need to be able to pay to play at the pointy end of the grid. 

A company looking to get involved in sponsoring a team in F1 can do so for as little as €500k per year, however, they would have no branding on the car or driver. 

A cool €1M a year could get your company’s sticker on one of the midfield cars, while it would cost €3-5M a year to get your logo on a Ferrari, Mercedes, or Red Bull. 

Title sponsorship ranges from €20-50M a year, and is often dependent on the strength and pedigree of the team. For example, Mercedes received almost 20% of all TV coverage during the 2021 F1 season, which is something they can factor in when setting their rates.

Cognizant are rumoured to have paid €35M for their Cognizant-Aston Martin deal, while Petronas tip in €42M for their Petronas-Mercedes partnership. The recent Oracle – Red Bull Racing sponsorship is in the vicinity of $300M for 5 years.

How do F1 payouts work?

Payments from Formula 1 are the second most lucrative way F1 teams make money. 

Every team is paid approximately $36 million USD prize money for being in the championship, which comes from revenue sources such as TV rights and circuit sponsorship. 

Then there are payouts for where teams finish in the Constructors Championship. For winning the championship in 2021 Mercedes received $61 million USD, while in last place, Williams received just $13 million USD.

As a long standing team, Ferrari received an additional $68 million USD simply for being Ferrari, and they are the only team to receive this payment. 

Though this is not the only payment that seems a bit odd…

A ‘Constructors Championship Bonus’ of $35 million USD was paid out to each of McLaren, Red Bull, Mercedes and Ferrari for their past performances in the championship. 

Williams pocketed $10 million USD as a ‘heritage payment’ and Red Bull received $36 million USD because they were the first team to sign the latest Concord Agreement. 

What is a pay driver in F1?

A pay driver in F1 is someone who, rather than get paid, pays for their seat through lucrative sponsors. 

Pay drivers have been around as long as there has been motorsport, yet these drivers often come in for more criticism than most. 

On the current grid Lance Stroll is bankrolled by his father Lawrence Stroll, Nicolas Latifi gets his seat at Williams due to how much money Lavazza Coffee and Sofina Foods bring to the team. Even Lando Norris’ seat at McLaren was first funded by his father

In a controversial case of ‘pay to play’ in 2021 Nikita Mazepin raced in the championship thanks to the sponsorship of Uralkali, his father’s company. When Russia invaded Ukraine the Haas team dumped Uralkali as a sponsor, and with it, Mazepin lost his seat. 

How do F1 constructors make money from car manufacturers?

Car manufacturers use F1 essentially as a marketing exercise. If a team is successful, people who want to be connected with that success will be tempted to buy a car by the same manufacturer. 

Likewise, people who support Red Bull may prefer to buy a Honda over a Mercedes or Alpine.

In 2019 Mercedes parent company, Daimler, put $80 million USD into the team’s coffers to help support their team’s bid to win the Constructors Championship once again.

Constructors also make money from selling engines to other teams on the grid. 

For example, Mercedes sell their engines to McLaren, Aston Martin and Williams, while Ferrari sells their engines to Alfa Romeo and Haas.

List of 2022 Formula 1 sponsors

Alfa Romeo F1 sponsors & partners

Title partner: PKN Orlen

Other partners: Adler, Acer, Acceleron, AMX, Camozzi, Code Zero, Delsey, DRF Bets, Singha, Additive Industries, Ferrari Trento, Floki, Globeair, Hyland, Iveco, Marelli, Mitsubishi Electric, Modere, Pirelli, Puma, Rebellion, Sebelt, Save the Children, Socios, Walter Meier, Web Eyewear, Zadara, ZCG

Alpine F1 Team sponsors & partners

Title partner: BWT

Other partners: Castrol, British Petroleum, RCI Bank and Services, Mapfre, Renault E-Tech, Microsoft, Mandiant, Binance, Dupont, Plug Power, Delphi Technologies, Data.ai, Bell and Ross, Kappa, Sprinklr, Boeing, Genii, Eurodatacar, Perkin Elmer, Shamir, Siemens, Yahoo, 3D Systems, Alpinestars, Alpine Eyewear, Elysium, GCaps, Hexis, KX, K-Way, Linde, Matrix, Roland, Trak Racer, Volume Graphics

Alpha Tauri F1 Team sponsors & partners

Title partner: Alpha Tauri

Other partners: Honda, Fantom, Epicor, Randstad, ICM.com, FlexBox, Pirelli, DAZN, Ravenol, Riedel, Siemens

Aston Martin F1 Team sponsors & partners

Title partners: Cognizant, Aramco

Other partners: Peroni 0.0, Crypto.com, JCB, NetApp, Sentinel One, Juniper Networks, EPOS, Girard-Perregaux, Socios, Pirelli, Bombardier, TikTok, Oakley, Ogio, Hackett London, IFS, Altair, Ebb, STL, Pelmar, Voip Unlimited, Alpinestars, Schuberth

Scuderia Ferrari F1 sponsors & partners

Partners: Shell, Santander, Velas, Snapdragon, Ray-Ban, Amazon Web Services, Richard Mille, Ceva Logistics, Estrella Galicia, Palantir, OMR, Puma, Kaspersky, RadioBook, VistaJet, Giorgio Armani, Mahle, Pirelli, SKF, NGK Spark Plugs, Brembo, Manpower Group, Techno Gym, Iveco, Bell Helmets, Riedel, Garrett, Sabelt, Qualcomm Technologies.

HAAS F1 Team sponsors & partners

Partners: 1&1, Alpinestars, Cyrus, Home Deluxe, Ionos, Maui Jim, Pirelli, Schuberth, Taittinger, Tricorp Workwear, Under Armor

McLaren Racing F1 Team sponsors & partners

Partners: British American Tobacco, Dell Technologies, DarkTrace, Arrow, Tezos, Webex, Unilever, Splunk, Stanley Black and Decker, Alteryx Analytics, SmartSheet, Data Robot, Gulf, GoPuff, Coca-Cola, CNBC, FxPro, Party Casino, Hilton, Medallia, Castore, Richard Mille, Easy Post, Free Fire, Immersive Labs, Klipsch, Tumi, Deloitte, Sikkens, Mind, Sparco, Logitech, SunGod, FAI Aviation Group, Ashurst, Pirelli, Mazak, Stratasys, Kaust, TechnoGym, Hookit, Merchants, Alienware, Veloce Esports, New Era

Mercedes AMG F1 Team sponsors & partners

Title partner: Petronas

Other partners: Ineos, UBS, TeamViewer, Crowd Strike, FTX, Hewlett Packard, IWC Schaffhausen, Marriott Bonoy, AMD, Monster Energy, Pure Storage, Tommy Hilfiger, TIBCO, Puma, Police Eyewear, OZ Racing, Endless, Axalta, Belstaff, Pirelli

Red Bull Racing F1 Team sponsors & partners

Title partner: Oracle

Other partners: Puma, Tag Heuer, Telcel, Mobil1, Tezos, Bybit, Honda, Claro, Rauch, Citrix, Poly, Armor All, Cash App, Arctic Wolf, Hewlett Packard, Inter.mx, AT&T, Siemens, PokerStars, Therabody, Pirelli, AlphaTauri, DMG Mori, Hexagon, PWR, Ansys, Gold Standard, Sabelt, Ocean Bottle, Walmart

Williams Racing F1 Team sponsors & partners

Partners: Sofina, Lavazza, Duracell, Acronis, Dorilton Ventures, Versa, Honibe, Financial Times, Symantec, Bremont, Pirelli, Umbro, Zeiss, Crew Clothing Company, PPG, OMP, KX, Nexa 3D, DTex, B&R, Mei, Life Fitness, That’s It, Sia, Thales.

How does Formula 1 make money?

With millions of dollars to pay out in prize money and legacy payments, how does Formula 1 make money to cover all the outgoings?

Thanks to a concerted effort from owners Liberty Media to crack the US market and get more eyeballs watching races through initiatives such as the Netflix series Drive to Survive most of F1’s money comes through selling TV rights across the world. 

Global television contracts contributed an eye-watering $587 million to Liberty Media’s bank account in 2020, with that figure set to rise in coming years. 

To beam pictures around the world Formula 1 provides a Global Feed which is sold to rights holders who then add the coverage to their subscription services, with prices varying wildly for different countries. 

For example, in the UK it costs around 30 GPB per month for Sky coverage, while fans in Indonesia pay the equivalent of 20 GBP for a whole year of coverage. 

F1’s second biggest source of revenue comes from race-sanctioning fees paid by event promoters to host a race. 

The average cost for a venue to host an F1 race is approximately $31 million USD, though historic venues such as Monaco pay significantly less. 

New locations such as Qatar and Saudi Arabia pay more than the average, hence the sceptics adapting the ‘we race as one’ phrase to ‘we race for money’ given those locations questionable human rights records. 

The third biggest income stream for F1 comes through ticketing for events and on-track sponsorship from brands such as Rolex and Pirelli. 

Do F1 Teams Make Money? – The Conclusion

Yes, F1 teams make money, but so much of what they make is reinvested back into car development because as Ricky Bobby says, if you aint first you’re last. 

While it is expensive to go racing, manufacturers see the costs as a marketing exercise to help sell more cars. 

F1 had a global TV audience of 1,922M during the 2021 F1 season (Brazil, Germany, Italy, UK, and the Netherlands were the top viewing markets) according to Nielsen.

Overall, Europe is the biggest market for TV audiences at 66,7%, followed by Central and South America at 22,1%, with Asia Pacific (5,1%), North America (3,4%) and Africa and Middle East (2,8%) rounding out the numbers. The average F1 viewer is 38 yo, 62% men and 38% women with an average of 0,44 kids per household.

These numbers make F1 more appealing than sports such as football or tennis that have an older demographic, meaning sponsors are eager to get on board now as the sport takes off in the US, reaching more and more people every race weekend.

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