F1 has presented its long-term roadmap for budget reduction to the teams, with a decision expected next week. It is understood that figures include a cap set for $145-M in Y 2021, coming down to $140-M in Y 2022 and then to $135-M for Ys 2023-25.
The targeted numbers are acceptable to midfield teams such as McLaren Renault and Alfa Romeo, but agreement is far from a given. There will be pushback on proposed budget cuts from Ferrari (NYSE:RACE) and Red Bull Racing.
Monday the F1 sporting director, Ross Brawn, announced that new proposals had been sent to the teams. Last year a cap of $175-Mwas agreed for Y 2021. The financial impact of races being called off because of C-19 coronavirus chaos caused the motorsport’s management to readdress the budgets.
Mr. Brawn believes F1, the FIA and the teams were close to coming to an agreement for Y 2021, but he noted the intent was for greater cuts without publicly offering any details.
“The discussion really is how much further down we can drive it in the next few years,” he said.
It is believed the $145-M ceiling has broad support, but the other numbers being discussed are likely to be contentious.
Ferrari has opposed a drop below $145-M, warning it was already a demanding request below which the team would be forced to consider how it employs its racing resources. The Scuderia’s Boss, Mattia Binotto, fears that too great a cap would risk devaluing the sport’s reputation for technical excellence as the pinnacle of motorsport. He is in favor of a 2-tier cap to reflect the higher spending of the bigger teams on manufacturing parts. This 2-tier approach is not in the proposal, which may be a block.
Red Bull Racing’s team principal, Christian Horner, has also opposed any imminent cap below $145-M. Earlier April a meeting with the teams to discuss a proposed drop to $130-M in Y 2022 saw no agreement reached. But, recent regulation changes by the FIA mean that unanimity of agreement across the teams is no longer required and the proposals can be adopted with a majority in the face of opposition.
Our overall technical outlook is Nutral to Bullish in here
Ferrari finished Tuesday at 154.06, -2.49 in NY.
The Maranello Outfit’s shares were raised to Buy from Hold at HSBC.
Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term luxury products investment, and I have called it at it at 200+/share long term, adjusting it to 200/share short term (after the virus) and siding with BAML to 230 long term for now.
Have a healthy day, Keep the Faith!