F1 to raise its Team’s budget cap amid inflation concers, know the reason explained
Formula One has introduced a new budget cap limitations for its teams to deal with the current global inflation.
F1 Increase Budget Cap Amid Inflation Concerns, Explained
Last year, the FIA introduced a limit of $145 million which is now cut down by $5 million to $140 million for this season. This new era package aimed at developing closer racing. Due to the limitations, the pricing of cars in this year’s events may vary slightly from previous year. Due to increased costs especially air freight, the action was called by the teams.
Top F1 teams like Red Bull, Ferrari and Mercedes had said, the rising global inflation and unexpected events such as the Russia-Ukraine war have made it impossible for them to stay within the budget cap and called it a force majeure state.
While most of the other smaller teams of the F1 were unwilling to accept the change within the regulation.
On Friday, the FIA came with an agreement after a meeting at the Austria Grand Prix. It was approved by a required majority of nine of ten teams. After the agreement, the governing body FIA came up with a statement;
‘‘ Rapidly increasing inflation rates since the end of 2021 have affected Formula 1 teams, and it is the opinion of the FIA and Formula 1 that this creates a risk of non-compliance with the financial regulations if actions are not takenʼʼ.
#F1 – FIA Formula 1 Commission Meeting 8 July 2022 – Statementhttps://t.co/czLttVPyIo
— FIA (@fia) July 8, 2022
The statement continued;
The governing body’s proposal allowed for “indexation at a limited rate of 3.1%”.This takes into account an original 3% inflation threshold already in the regulations and allows compounding from 2023.
“This will preserve the long-term integrity of the financial regulations,”.
The introduction of the Technical Directive to control the porpoising during the racing would also delayed until the Belgian GP. It was confirmed during the meeting.
During the FIA body meeting the approval for next year’s pre-season testing to be held outside of Europe was also given. Under the current F1 regulations, testing can only take place within Europe unless agreed by the majority of the teams.
It will be interesting to see how big names including Ferrari, Mercedes and Red Bull will manage the weight of their expenditures for the upcoming events in the future.
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