Inflation making budget cap harder for Mercedes

Jamie Woodhouse
Mercedes F1 nose and front wing. Abu Dhabi December 2021

Mercedes F1 nose and front wing. Abu Dhabi December 2021

Mercedes boss Toto Wolff has explained the inflation-level spike is making it harder to operate under the budget cap.

Formula 1 successfully brought a new cap on spending into play ahead of the 2021 season which saw teams limited to expending $145m for the season with certain exceptions, such as driver salaries.

That limit has reduced again for the forthcoming 2022 season, with $140m now the ceiling of the cap.

The budget cap was introduced in an effort to bring teams closer together from a spending perspective, with the three highest spenders – Mercedes, Red Bull and Ferrari – generally pulling away to form their own battle at the top with a midfield behind.

But with inflation levels at a near 30-year high of 5.5% in the UK, Wolff explained that the latest $5m cut in spending has been extremely challenging.

Lewis Hamilton during the Mercedes W13 shakedown . Silverstone February 2022.
Lewis Hamilton during the Mercedes W13 shakedown . Silverstone February 2022.

“It has been very difficult to structure the company and the organisation in the right way to meet the cost cap at $140m,” Wolff told Motorsport.com.

“Also, in a high-inflation environment, we are not only reducing by $5m but we have a situation where you are not able to really increase the costs and the payroll. So that is extremely painful.”

It has meant Mercedes must now be much more cautious with their research and development projects, following through on the one that has the highest potential rather than having the freedom to test out several different avenues.

“And on the other side, you have to decide very carefully where you invest your dollar in R&D,” Wolff continued.

“In the past, it was a bit easier because you could follow various avenues in chasing performance.

“Today, you have to decide which one has the highest potential and then embark on it. It’s a totally different way of operating for the big teams.”

 

The 2022 season marks the start of a new regulatory era in Formula 1, a major shift from the previous season.

Teams have started from scratch with their 2022 challengers, but if a team was to find a fundamental flaw in their project Wolff believes it would be very difficult to put it right and still adhere to the cost cap.

“It’s one side where actually you can really change concepts technically because sometimes you embark on a direction, that’s it,” said Wolff on the possibility to change a car concept.

“And then the added pressure of the cost cap makes it very difficult to then change the basic, change the car fundamentally.

“Because everything is planned, every upgrade and their related costs are planned, and therefore we are much more restricted with the budget cap in our ability to implement the creative process onto the car.”

 

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