FORMULA 1 RACING MARKET 

KEY FINDINGS

1. The global Formula 1 racing market is expected to grow from $XX billion in 2023 to $XX billion by 2030, at a CAGR of 7.4%.
2. This growth is being driven by a number of factors, including the increasing popularity of Formula 1 racing in emerging markets, the growing investment in Formula 1 racing by sponsors and teams, and the increasing use of technology in Formula 1 racing.
3. Formula 1 racing is a global sport with a large and growing fan base. The sport is also very popular in emerging markets, such as China and India, where there is a growing middle class with disposable income. This is driving growth in the demand for Formula 1 racing tickets, merchandise, and sponsorships.
4. The Asia Pacific region is expected to be the fastest-growing market for Formula 1 racing in the coming years.
5. The media and broadcasting segment is the largest segment of the global Formula 1 racing market, accounting for over 50% of the market in 2023.
6. The sponsorship segment is expected to be the fastest-growing segment of the global Formula 1 racing market in the coming years.
7. The key trends driving the growth of the global Formula 1 racing market include: Increasing popularity of Formula 1 racing in emerging markets,Growing investment in Formula 1 racing by sponsors and team,Rising disposable incomes in emerging markets,Increasing government investment in sports and entertainment
8. The key challenges facing the Formula 1 racing market include:High cost of participating in Formula 1 racing,Stringent safety regulations
9. The future trends for the Formula 1 racing market include:Growing popularity of e-racing,Use of artificial intelligence and machine learning to improve performance
10. The key investment opportunities in the global Formula 1 racing market include:

           Sponsorship rights,Team ownership and Fan engagement

 
FORMULA 1 RACING MARKET OVERVIEW

Formula 1 racing is the pinnacle of motorsport, and the global Formula 1 racing market is worth billions of dollars each year. The market is expected to grow in the coming years, driven by factors such as the increasing popularity of Formula 1 racing in emerging markets, the growing investment in Formula 1 racing by sponsors and teams, and the increasing use of technology in Formula 1 racing.

The global Formula 1 racing market is segmented into four main categories: media and broadcasting, sponsorship, ticketing, and merchandise. The media and broadcasting segment is the largest segment of the market, accounting for over 50% of the market in 2023. This is due to the high demand for Formula 1 racing content from fans around the world.

The sponsorship segment is the fastest-growing segment of the market, and is expected to continue to grow at a rapid pace in the coming years. This is due to the increasing investment in Formula 1 racing by sponsors. Sponsors see Formula 1 racing as a valuable platform to reach their target audiences and build brand awareness.

The ticketing and merchandise segments are also important segments of the global Formula 1 racing market. Fans are willing to pay a premium to attend Formula 1 races and purchase Formula 1 merchandise.

The global Formula 1 racing market is geographically segmented into North America, Europe, Asia Pacific, Latin America, and the Middle East and Africa. Europe is the largest market for Formula 1 racing, accounting for over 40% of the market in 2023. However, the Asia Pacific region is expected to be the fastest-growing market for Formula 1 racing in the coming years. This is due to the increasing popularity of Formula 1 racing in emerging markets such as China and India.

The key players in the global Formula 1 racing market include Formula One World Championship Limited, the FIA Formula One World Championship, and the teams that compete in the Formula One World Championship.

INTRODUCTION TO FORMULA 1 RACING MARKET OVERVIEW

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.

In March 2023, Liberty Media announced that it would be investing in new factories for the Formula 1 teams. The goal is to reduce costs and improve sustainability by centralizing the production of certain components, such as gearboxes and suspensions.

In August 2023, Liberty Media announced that it would be introducing new sustainability regulations for Formula 1. The regulations are aimed at reducing the environmental impact of the sport and making it more sustainable.

 In June 2023, the FIA announced new Formula 1 engine regulations for 2026. The new regulations are aimed at making F1 engines more sustainable and affordable. The regulations will require engines to use 100% sustainable fuel and will reduce the cost of engine development.

FORMULA 1 RACING MARKET SEGMENTATION

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

By Region

1. North America
2. Europe
3. Asia Pacific
4. Latin America
5. Middle East and Africa

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

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 the 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 on 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 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.

RECENT TECHNOLOGICAL TRENDS IN THE FORMULA 1 RACING MARKET

McLaren Racing and Microsoft have partnered to develop a new AI-powered platform that will help the team improve its performance.Ferrari has developed a new active suspension system that can adjust the ride height of the car in real-time to improve its performance in different conditions.

Red Bull Racing has partnered with SAP to develop a new digital twin of its Formula 1 car. Mercedes-AMG Petronas Motorsport is working on a new sustainable fuel that is made from recycled waste.

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.

The 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 redeveloped 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 “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 tire 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, have 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 IN FORMULA 1 RACING MARKET OVERVIEW

Mercedes-Benz remains the most profitable team in Formula 1, followed by Ferrari and Red Bull Racing. However, the gap between the top teams and the rest of the field is narrowing. In 2023, the bottom-placed team received around $1.5 million per race on average, up from $1.1 million in 2020.

There have been no major changes in Formula 1 team ownership in the past year. However, there is speculation that the Volkswagen Group may enter the sport in 2026, either by taking over an existing team or by starting its own team.

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.

Honda has left Formula 1, and Red Bull Racing is now building its own engines through its Red Bull Powertrains division. This leaves Mercedes-Benz and Ferrari as the only two engine suppliers in the sport.

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 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 anti-dilution fund that was introduced in the 2021 Concorde Agreement has made it more difficult for new teams to enter Formula 1. However, there is still interest from new teams, and it is possible that one or two new teams may join the grid in the next few years.

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.