Explained F1 Budget Cost And Salary Cap 2022 And What It Means For Formula One Teams

Explained F1 Budget Cost And Salary Cap 2022 And What It Means For Formula One Teams

F1 implemented a budget cap in 2021 to create fair competition among teams, we take a look at what it means for all teams for the 2022 season and what is the salary cap

Formula 1 broke new ground in 2021 by implementing financial regulations in the rules and sporting and technical regulations. The objective of the cost cap was to create a more competitive championship by limiting the spending of richer teams. Another goal of this salary cap was to make sure all teams in F1 could sustain financially long-term.

Why Salary and Budget Cap And What Will They Be In The F1 2022 Season

The COVID-19 pandemic caused the postponement of the 2020 F1 season, and as a result, many F1 teams faced heavy financial damage. However, the three wealthiest F1 teams, Mercedes, Ferrari, and Red Bull, spent much more than competitors. FIA and F1 authorities feared the three teams having a monopoly over the world championship due to solid financial backup and hence came up with a salary cap.

The budget cap includes expenditure that is related to car performance only. The costs of marketing, driver salaries, and staff salary are excluded from the budget cap. This exclusion ensured the team drivers and staff weren’t affected by the budget cap.

Formula One 2022 Budget Cost Cap and What It Means for Smaller Teams

The budget cap for the 2021 F1 season was 145 million dollars, and it will be 140 million for the 2022 season. Further, 2023 season onwards, the budget cap will be 135 million dollars. With this budget cap in place, smaller teams will cover basic costs through prize money in F1 Championship.

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It was also mentioned that budget cap will increase 1 million dollar per race if there are more than 21 races in a season. Since, 2022 F1 season has 23 races, it can be said that the budget cap is 142 million dollars. The budget cap represents the cost of building and running the cars with the salaries of drivers and the team principal and technical director excluded.

Teams will have a maximum budget of $30m to split between two drivers. However, teams can spend more than $30m on drivers but it’s been agreed that any excess will be lopped off the team’s operational budget cap.

There’s a long list of items that are not included in the budget cap, which in essence represents the cost of building and running the cars.

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According to previous terms, smaller teams earned nearly 50 million dollars. However, after implementing the new deal, teams will be able to make around 65 million dollars.

Setbacks for Rich Teams

Salary Cap benefitted the smaller teams and helped level the racetrack, but it wasn’t much of a blessing for big teams. Ferrari Team Principal admitted that it was difficult for the team to maintain the same performance level at a budget that was 50% of their previous budget.

The budget cap also includes capital expenditure. Hence, rich teams hesitate to upgrade existing facilities constantly. This factor will help smaller teams reach rich teams at a much faster rate.

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