Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • Munich Auto Show
    • Geneva Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Technology
    • Segment Analysis
    • Cars & Concepts
    • Supplier Spotlight
    • Europe By The Numbers
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress
    • ANE Rising Stars
    • ANE Eurostars
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: All or nothing: Why circular business models require a holistic approach
    • Capgemini: Invent Head on automotive takeaways from CES 2023
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • Capgemini: The circular economy is spurring new thinking on EV batteries
    • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
    • HEXAGON: Plugging into data is the only way to make winning EVs
    • TUV Rheinland: Ideas, services and certifications for smart mobility
    • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Racing
May 07, 2022 03:13 AM

What Audi and Porsche stand to gain from joining Formula One

Porsche and Audi plan buy their way into Formula One amid a surge of U.S. interest following a popular Netflix documentary on the race series.

Bloomberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Formula One Miami Grand Prix May 8, 2022
    REUTERS

    Red Bull's Max Verstappen crosses the line to win the Formula One Miami Grand Prix.

    The announcement that Porsche and Audi want to lend their names to Formula One comes at a high point of popularity in the U.S. for the world’s most glamorous racing series.

    Miami’s first-ever F1 Grand Prix took place on Sunday. Race-day ticket prices hit $1,342 on the secondary market, more than prices for the NBA finals, Stanley Cup, and World Series, according to the ticket-seller TickPick.

    Luxury hotel, restaurant, and entertainment packages sold for as much as $110,000. More than 240,000 fans were expected to attend the sold-out event, with 82,500 surrounding the track in Hard Rock Stadium.

    Related Article
    McLaren 'not for sale' as Audi seeks to enter F1
    Audi, Porsche to join Formula One, VW CEO says
    Audi raises offer for stake in McLaren's F1 unit, report says

    Experts credit the popular Netflix documentary Formula One: Drive To Survive with stirring a surge of U.S. interest in the sport founded in Europe in the 1950s.

    "The F1 Grand Prix has always been a popular event, but it hasn’t become the story that this Miami Formula 1 race has been" says Brett Goldberg, co-founder and co-CEO of TickPick.

    "A fair amount of it was the success of the Netflix documentary. That itself has brought massive awareness to the U.S.”Race organizers in Miami have said they plan to increase capacity in coming seasons. A second new American race is scheduled for November 2023 in Las Vegas.

    How they will do it

    Much remains unclear about what it will mean for Porsche and Audi as they buy their way into the prestige of a sport that reported annual revenue of $2.136 billion across its 22-race calendar in 2021. The series made $92 million in profits that year after losing $386 million during 2020.

    Race promotion — companies and promoters paying to be associated with F1's grandeur — was the biggest revenue stream, accounting for 40 percent of total income. Qatar, for instance, pays $55 million per year for its contract to host F1—the highest amount on the list of contract costs; Mexico pays $25 million.

    REUTERS/Marco Bello

    Mercedes' Lewis Hamilton during the Miami Grand Prix qualifying stages.

    There are three ways Audi and Porsche could enter such a blue-blooded field. They have already supplied engines to other teams. This year, for instance, Mercedes supplied engines to four of the 10 teams on the F1 grid; Porsche briefly supplied turbocharged engines to McLaren in the 1980s and to a team called Footwork (formerly Arrows) in the early 1990s.

    Stronger options are to buy an existing team and use that platform for their own engineering, or to launch a bona fide factory team, like Ferrari's, which would demand hundreds of millions of dollars in research, engineering, and other investment—not to mention years of time refining the new technology for a race.

    Spokespeople from both brands declined to answer questions about whether joining F1 means launching such a team, or if they would go another route such as supplying engines and technology for others.

    Bloomberg earlier reported that Porsche is considering providing power units to Red Bull. Porsche’s plans, while unannounced, are "quite concrete," said parent-group Volkswagen Group's CEO, Herbert Diess. Audi's plans are less advanced, though progressing, Diess said.

    Audi may offer around $556.3 million to acquire McLaren as a means to enter, according to some reports. "Both premium brands see it as the right decision [to join F1] and are prioritizing it," Diess said during a town hall discussion in Wolfsburg, Germany, on May 1. He declined to specify the timing or exact nature of the commitment.

    A moneymaking opportunity

    There is clearly potential to leverage new American F1 fans into conquests for VW Group's highly profitable premium car brands.

    Winning in Formula One bolsters brand image and awareness across multiple segments of consumers, Goldberg says, which translates to car sales. It is no coincidence that some of the coolest inventions now popular on modern sports cars -- big rear wings, paddle-shifting, and carbon-fiber elements to help increase efficiency—directly descended from F1 cars.

    "Your [potential] Porsche enthusiast, your sports car enthusiast—they do not always translate to NASCAR, but they do translate to Formula 1," he says. "That is a wealthy group of individuals."

    In addition to potential car sales, Porsche and Audi teams could also make money from co-branding and sponsorships. The most successful racing teams such as Ferrari, Mercedes, and Red Bull count multimillion-dollar deals with sponsors and advertisers like Oracle, Puma, Tag Heuer and Walmart. In February, Red Bull Racing signed a single sponsorship deal worth $150 million with Bybit, a Singapore-based cryptocurrency platform.

    REUTERS

    Porsche takes part in the Le Mans 24-hour sportscar race, which is less well known than F1. Shown is a Porsche 919 Hybrid racing in Le Mans in France in 2015.

    They could also win hundred of millions of dollars in prize money. Roughy 47.5 percent of F1 profit makes up the prize money, which is then divided into two categories: Half goes to the F1 and its shareholders; half goes to the teams, which they divide based on final standings for the year.

    "The sport in North America [is] under-viewed, under-monetized, under-everything," said Greg Maffei, the president and CEO of Liberty Media, which owns F1. "I don’t think that gets solved in a week, but I think that is an interesting long-term opportunity."

    Risky bet on a marketing goldmine

    There are some risks to joining F1, especially for Porsche, which built its brand image on the plucky race cars and rallies of the 1960s, 1970s and 1980s. For the power brokers at VW, the old adage "win on Sunday, sell on Monday" still holds true. (Cars that win races instill consumers with a favorable view of their brands and make people want to drive the street-legal cousins of the winning cars.)

    "We are assuming that in 2026 or 2028, Formula 1 will be the biggest motorsport spectacle in the world—even more than today—bigger in China, bigger in the United States," Diess said. "And with that, also the largest marketing platform for premium vehicles."

    But "win" is the operational word.

    For Porsche, which got mixed results in Formula E and races only occasionally, in lesser-known series such as Le Mans, entering F1 but faring poorly would potentially hurt the image of VW Group’s most profitable brand. Porsche has built its allure on the back of a highly successful (non-F1) racing car, the 911. As Porsche's most profitable vehicle, the 911 contributes 11 percent of Porsche sales by volume while accounting for roughy 30 percent of earnings.

    Aston Martin, for instance, has suffered this season as its drivers continue to finish at the back of the pack. While the company also faces other headwinds, such as a disappointing initial public offering and subsequent churning of top management, the fact that the British brand is currently ranked ninth of 10 teams does not help morale among loyal fans, or win new ones for the brand.

    On May 4, Aston Martin named former Ferrari boss Amedeo Felisa as top executive. Felisa immediately replaced Tobias Moers, who joined the company in 2020 from Mercedes-Benz's high-performance AMG brand. Rumors have circulated for months that Aston Martin Chairman Lawrence Stroll is looking to sell the automaker's racing team.

    A proven record

    Ferrari provides the gold standard case study for the power of F1. It is the world's strongest brand in all categories for nearly a decade, according to the Annual Brand Ranking report that balances scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance.

    Ferrari builds just over 11,000 cars per year but trades on a gargantuan footprint of loyalty, heritage, and a winning tradition bolstered largely by its longstanding involvement in F1. Cumulatively, the Italian supercar maker and racing team are worth more than $27 billion.

    "The embodiment of luxury, Ferrari continues to be admired and desired around the world," wrote David Haigh, the CEO of Brand Finance. "It is no wonder that many consumers, who might never own a Ferrari car, want a bag or a watch emblazoned with the Prancing Horse."

    The success of Ferrari's racing cars on the track in the 1950s and ‘60s built the fame and reputation that fueled the appetite for the brand’s first popular road-going cars; its million-dollar icons such as the F40 drew close parallels to the race cars of the 1980s. Its fans, known as Tifosi, are the most notorious force behind any F1 team on the planet. In 2017, one in three F1 fans described themselves as Ferrari supporters, according to a F1 fan survey in 2021.

    The caveat is that on the world's best-known race track, you must win to stay popular—and feel you are getting your money's worth from the more than $145 million budget required to field a team.

    In the years since 2017, Ferrari fell off its competitive race pace and has lacked the star power of a driver such as Mercedes's Lewis Hamilton. It's no coincidence that last year, just 18 percent—fewer than one in five—of racing fans still described themselves as supporters of the brand. (Sales of Ferrari street cars nonetheless rose.) Close observers might observe a bump in popularity after this year: Ferrari is currently running in first place in the constructors team standings.

    Selling electric in 2026

    There is also the question of how entering an old, fossil-fueled race series could help sell electric vehicles, which Audi and Porsche have committed to selling extensively. The brands have timed any move carefully. A rule change stipulates that in 2026 all F1 race cars will have new engines that are more electrified and run on synthetic fuel.

    The adjustment levels the playing field for any brands that might want to enter the series. All will be building engines to comply with the rule change.

    "You can't enter Formula 1 unless a technology window opens up, which means, in order to get in there, a rule change so that everyone starts again from the same place," Diess said.

    It was unclear whether ownership of Rimac, a Croatian battery provider and automaker, might play a role in Porsche moves to develop technology for itself or others in the series. A spokesperson for Porsche declined to say whether making an F1 move means Porsche would withdraw from Formula E.

    Diess, for his part, was more direct: "It's really only Formula 1 that counts," Diess said. "If you do motorsport, you should do Formula 1, as that is where the impact is greatest.

    RECOMMENDED FOR YOU
    Mercedes set to invest billions in German, Chinese and Hungarian plants
    Recommended for You
    Mercedes A-Class production Rastatt wheel
    Mercedes set to invest billions in German, Chinese and Hungarian plants
    Volkswagen VW Russia Kaluga factory
    VW sees all its Russian assets frozen by court
    Audi e-tron at 2022 Wuhan auto show
    Audi seeks to catch up in China in test of Germany's automotive grit
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • Advertise with us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Munich Auto Show
        • Geneva Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Technology
      • Segment Analysis
      • Cars & Concepts
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress
      • ANE Rising Stars
      • ANE Eurostars
    • More
      • Publishing Partners
        • Capgemini: All or nothing: Why circular business models require a holistic approach
        • Capgemini: Invent Head on automotive takeaways from CES 2023
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • Capgemini: The circular economy is spurring new thinking on EV batteries
        • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
        • HEXAGON: Plugging into data is the only way to make winning EVs
        • TUV Rheinland: Ideas, services and certifications for smart mobility
        • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us