Global Formula 1 Racing Market 2021-2026

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    GLOBAL FORMULA 1 RACING MARKET 

     

    KEY FINDINGS

    1.  Formula One Group is looking for the expansion of event organizations outside of Europe as they tend to have higher race promotion fees. 
    2. There has been a significant update in the 2022 Formula One car which gets bigger wheels 18” replacing the 13” ones.
    3. The Volkswagen group wants to enter F1 via their two brands – Audi and Porsche from 2026. Audi wants to take over Formula 1 team McLaren, while the plan for Porsche is to forge an engine partnership with Red Bull or Williams.
    4. In 2025, F1 aims to unveil the new Formula 1 engine, the second generation hybrid power unit which will be carbon neutral and powered by a drop-in advanced sustainable fuel.
    5. The Formula 1 Group has bounced back well from the COVID-19 pandemic and has been firing all cylinders since resumption. After nine months in 2021, the overall revenue generated was $1.3 billion, up 52% from $600 million in the same period in 2020.

     

    INTRODUCTION

    Formula One is the highest class of international auto racing for single-seater formula racing cars sanctioned by the Federation Internationale de L’Automobile (FIA).

     

    The World Drivers’ Championship, which became the FIA Formula One World Championship in 1981, has been one of the premier forms of racing around the world since its inaugural season in 1950. A Formula One season consists of a series of races, known as Grand Prix, which take place worldwide on both purpose-built circuits and closed public roads.

     

    The Formula One racing market is an opportunity for engine manufacturers, and tire manufacturers to showcase their latest technology which eventually makes its way to consumer-grade passenger cars. Formula One cars are the fastest regulated road-course racing cars in the world, owing to very high cornering speeds achieved through the generation of large amounts of aerodynamic downforce.

     

    infographic: Formula 1 Racing Market , Formula 1 Racing Market Size, Formula 1 Racing Market Trends, Formula 1 Racing Market Forecast, Formula 1 Racing Market Risks, Formula 1 Racing Market Report, Formula 1 Racing Market Share

     

    In January 2017, Liberty Media confirmed the completion of the acquisition of Delta Topco, the company that controls Formula One, from private-equity firm CVC Capital Partners for $8 billion. Following their purchase of the commercial rights, Liberty Media has announced their vision for the future of F1.

     

    The proposal identified five key areas, including streamlining the governance of the sport, emphasising cost-effectiveness, maintaining the sport’s relevance to road cars and encouraging new manufacturers to enter the championship whilst enabling them to be competitive. 

     

    Liberty Media has set 2021 as their target date as it coincided with the need to renew commercial agreements with the teams and the end of the seven-year cycle of engine development that started in 2014.

     

    In August 2020, they announced that all 10 F1 teams had signed up to the new Concorde Agreement and, this will come into effect at the start of the 2021 season and will change how prize money and TV revenue is distributed.

     

    GLOBAL FORMULA 1 RACING MARKET SEGMENTATION

    The Global Formula 1 Racing Market can be segmented into the following categories for further analysis

     

    By Formula 1 Championship

    1. Race Promotion
    2. Broadcasting (Media Rights)
    3. Sponsorship
    4. Other Revenue

     

     By Grand Prix Venue

    1. British GP
    2. Italian GP
    3. Monaco GP
    4. Hungary GP
    5. US GP
    6. Others

     

     By Teams

    1. Ferrari
    2. Mercedes
    3. Red Bull Racing
    4. McLaren
    5. Williams
    6. Alfa Romeo Racing
    7. Aston Martin
    8. Alpha Tauri
    9. Alpine
    10. Haas F1 Team

     

     

    GLOBAL FORMULA 1 RACING MARKET DYNAMICS

    Formula One derives its primary revenue from the development of the World Championship through a combination of entering into race promotion, broadcasting & advertising and sponsorship arrangements.

     

    From 2010 significant regulatory changes were brought in and the following years saw an increase in the downforce of the cars. In 2014, new engine regulations came into force, when new 1.6 litre turbocharged and hybrid engines became a norm.

     

    Formula 1 has launched a plan to become carbon neutral by 2030. Their plan is to move to ultra-efficient logistics & travel, and 100% renewable-powered offices, facilities & factories, and offset emissions that cannot be cut.

     

    In January 2020, FIA and Formula One signed the United Nations “Sports for Climate Action” framework and affirmed that they would become carbon neutral by 2030. Since the introduction of the hybrid power unit in F1 to the creation of the environment and sustainability commission, the entire FIA community has been investing their time, energy and financial resources to the benefit of environmental innovations.

     

    Formula One Group is looking for the expansion of event organizations outside of Europe as they tend to have higher race promotion fees. There has been a significant update in the 2022 Formula One car which gets bigger wheels 18” replacing the 13” ones. This has led to an increase in the weight of the car from 752 kg to 790 kg. The other factor that has affected the weight of the car is the increased safety requirements, with the magnitude of crash tests being increased to ensure the safety of the drivers.

     

    F1 Group has also announced a record 23-race calendar for the 2022 season starting from March 20th and concluding on November 20th. Qatar has been included in the 2021 calendar and the race is scheduled for the 3rd weekend of November 2021 and it has signed a deal for 10 years starting from 2023. Due to ongoing pandemic conditions, China will not be included on the 2022 calendar and will be restored to the calendar as soon as conditions allow.

     

    In 2025, F1 aims to unveil the new Formula 1 engine, the second generation hybrid power unit which will be carbon neutral and powered by a drop-in advanced sustainable fuel. 100% sustainable fuels reduce the environmental impact of all new and existing ICE based road-cars globally (of which there are estimated to be 1.4 billion on the road by 2030, only 8% of which are estimated to be purely electric). 

     

    The current F1 hybrid power unit is the most efficient in the world, delivering more power using less fuel, and therefore CO2 than any other car. The technology that already exists in F1 alongside a sustainable fuel model has the potential to be a game-changing moment.

     

    COVID-19 IMPACT ON GLOBAL FORMULA 1 RACING MARKET

    The COVID-19 pandemic has caused disruption to motorsport across the world, mirroring its impact across all sports. Across the world and to varying degrees, events and competitions have been cancelled or postponed.

     

    The early 2020 Formula 1 season was disrupted by the COVID-19 pandemic and, also Formula 1 has scrapped the original calendar for 2020 and offered a far bolder revised version. Due to this pandemic, the start of the season was postponed until early July, which led to the cancellation of certain events like the 2020 season-opening Australia GP was abruptly cancelled shortly before the start of the first free practice session, also Monaco and French GP were cancelled eventually.

     

    The other events like Azerbaijan, Bahrain, Canadian, Dutch, Spanish and Vietnamese GP were postponed and rescheduled to later dates, while the Chinese GP had already been postponed prior to the pandemic. The 2020 world championship calendar was originally scheduled to have 22 events, while the revised calendar consisted of 17 events in 12 countries across Europe and the Middle East regions.

     

    Prior to the start of the 2020 season, Ferrari and Alpha Tauri expressed their concern about the spread of the virus and its effect on the championship. Both these teams are based in Italy, which has suffered one of the worst outbreaks of the virus outside China, and so both Ferrari and Alpha Tauri were therefore concerned over the ability of their staff to leave a quarantine zone that was established in northern Italy.

     

    The first two quarters of 2020 were completely washed out as the races which were supposed to start by March were postponed indefinitely. Later the races resumed only in July, resulting in meagre combined revenue of $64 million for the first two quarters of 2020. There was also a considerable drop in revenue generated by broadcasting due to certain fee relief arrangements being made with broadcasting partners, resulting in fewer events within a shorter period of time than anticipated.

     

    To overcome the following losses suffered in 2020, the cost cap was reduced from $175 million to $145 million in 2021. This decision will cause a significant fall in prize money payouts from formula 1 as a result of the reduced revenue from track hosting fees. The sport has also planned to overhaul its technical regulations for the 2021 championship is one of the largest changes in its seventy-year history.

     

    The pandemic prompted these changes to be postponed until 2022, with teams required to enter their 2020 cars in the 2021 championship to minimise the financial stress placed on the teams. The Formula 1 Group has bounced back well from the COVID-19 pandemic and has been firing all cylinders since resumption. After nine months in 2021 ended, the overall revenue generated was $1.3 billion, up 52% from $600 million in the same period in 2020. 

     

    RECENT TECHNOLOGICAL TRENDS IN THE GLOBAL FORMULA 1 RACING MARKET

    The Formula One Group has planned to launch a new second-generation hybrid power F1 engine by 2025 which will be carbon neutral and powered by a drop-in advanced sustainable fuel. The current F1 hybrid power unit is the most efficient in the world, delivering more power using less fuel.

     

    McLaren Formula One racing team uses High-Performance Computing (HPC) systems, powered by Dell PowerEdge servers and Intel processors to design and engineer fast cars. They also use HPC systems to collect and process streaming telemetry data during the races to conduct complex computational fluid dynamics (CFD) studies on the airflows. It has upgraded HPC for CFD aerodynamics testing and stress analysis as well as to redevelop trackside IT infrastructure.

     

    The Formula One group is still working hard to introduce a fully sustainable fuel in the future. The fuel to be used in 2022 F1 cars will see the bio-components ratio rise to 10%. The fuel is termed as “E10 fuel”, where ‘E’ stands for Ethanol and ‘10’ refers to the percentage in the fuel mixture. Current regulations see cars running on fuel containing 5.75% bio-components.

     

    Formula One has announced a big change ahead of the 2022 season with the introduction of the next-generation race car. Pirelli, the exclusive tire provider to the F1, is seizing the moment, shifting its supply, development and manufacturing processes to better synergize its race tires operations with more traditional road-going rubber. As a part of this revamp, Pirelli will increase the size of the F1 racing tires from 13 inches to 18 inches. Pirelli has designed with the goal of reducing the amount the tyres overheat when they slide – a primary aspect that should help with closer racing.

     

    McLaren Racing and Smartsheet, the enterprise platform for dynamic work, has announced a new partnership which will be integrated into the McLaren Racing infrastructure to help drive the team’s digital transformation, with an initial focus on smarter asset management to support fan engagement and race operations through Smartsheet’s digital asset management platform. The Smartsheet brand will first be represented on the McLaren MCL35M race cars at the 2021 Sao Paulo Grand Prix, and then on the race cars for the 2022 season and beyond.

     

     

    COMPETITIVE LANDSCAPE

    Formula One group’s revenue in 2020 declined by a whopping 44% due to the cancellation of many races and final revenue ended at $1.1 billion from $2.02 billion in 2019. Currently, Mercedes-Benz is the most profitable and high revenue generating team among all the other teams closely followed by Ferrari. Around 48% of the prize money is currently handed to just three teams – Mercedes, Ferrari and Red Bull Racing. 

     

    The remainder is divided amongst the others and if this split remained in effect, it would leave the bottom-placed team with only around $1.1 million per race on average in 2020. Mercedes was awarded $61 million for finishing first in the 2019 season. Ferrari got $41 million for finishing third.

     

    Formula One has been very brutal on mid-level teams which have resulted in a closedown of teams such as Lotus, Force India and Manor Racing. Force India fell into bankruptcy in 2018 had to be saved by Lawrence Stroll who continued the funding for the foreseeable future.

     

    In 2020, Williams sold its advanced engineering division to Dorilton Capital due to financial pressures, ending family ownership of and involvement with the team. 

     

    Honda is about to end the tie-up with the Red Bull Racing team at the end of 2021. However, Honda has signed a detailed deal from 2022 to 2025 where it will assist Red Bull Racing to build the engine on its own. Post that, Red Bull will take responsibility for all the F1 activities as it ramps up its own powertrains division.

     

    In 2020, the revenue generated from race promotion decreased as compared to the prior year, mainly because fans were prohibited at all but three events during the 2020 season. This led to one-time changes in the contractual terms of the originally scheduled events that remained on the revised 2020 calendar, and limited revenue from the other events.

     

    Media rights and sponsorship revenue decreased during the Q3 of 2021 due to the impact of lower proportionate recognition of season-based income. Also due to the fact that 7/22 races took place in the Q3 of 2021 compared to 10/17 in the Q3 of 2020. It was also partially offset by growth in F1 TV subscription revenue and revenue from new sponsors. Broadcasting revenue accounted for 55%, 38% and 33% of Formula 1’s total revenue for the years 2018, 2019 and 2020.  

     

    The Volkswagen group wants to enter F1 via their two brands – Audi and Porsche from 2026. The German automotive manufacturer Audi also wants to take over Formula 1 team McLaren, but the working team of McLaren is not interested in selling the company as they just got their financial footing back after COVID-19 pandemic. While the plan for Porsche is to forge an engine partnership with Red Bull or Williams.

     

    Formula One has agreed to strengthen the value of the 10 teams by making a spot on the grid more exclusive, which is why it incorporated an anti-dilution fund. As per this, a new team could have to pay $200 million shared across the existing teams into the new Concorde Agreement signed last year.

    COMPANY PROFILES

     

    THIS REPORT WILL ANSWER FOLLOWING QUESTIONS

    • Market Size and Forecast, by geography($M)
    • Opportunities and risks in Formula 1 racing market
    • Important technology trends and regulatory changes
    • 5 key predictions for next 5 years in  Formula 1 racing market
    • Competitive landscape and market share of leading vendors
    Sl no Topic
    1 Market Segmentation
    2 Scope of the report
    3 Abbreviations
    4 Research Methodology
    5 Executive Summary
    6 Introduction
    7 Insights from Industry stakeholders
    8 Cost breakdown of Product by sub-components and average profit margin
    9 Disruptive innovation in the Industry
    10 Technology trends in the Industry
    11 Consumer trends in the industry
    12 Recent Production Milestones
    13 Component Manufacturing in US, EU and China
    14 COVID-19 impact on overall market
    15 COVID-19 impact on Production of components
    16 COVID-19 impact on Point of sale
    17 Market Segmentation, Dynamics and Forecast by Geography, 2021-2026
    18 Market Segmentation, Dynamics and Forecast by Product Type, 2021-2026
    19 Market Segmentation, Dynamics and Forecast by Application, 2021-2026
    20 Market Segmentation, Dynamics and Forecast by End use, 2021-2026
    21 Product installation rate by OEM, 2021
    22 Incline/Decline in Average B-2-B selling price in past 5 years
    23 Competition from substitute products
    24 Gross margin and average profitability of suppliers
    25 New product development in past 12 months
    26 M&A in past 12 months
    27 Growth strategy of leading players
    28 Market share of vendors, 2021
    29 Company Profiles
    30 Unmet needs and opportunity for new suppliers
    31 Conclusion
    32 Appendix

     

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