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How Do New Teams Enter Formula 1?

Editorial credit: ZRyzner / Shutterstock.com

Over the decades since F1 started as a racing discipline, the sport has tried to be the most advanced series in the motorsport world. Over the years, this has imposed demands on F1 teams, resulting in existing organizations leaving the sport and others filling in the gap.

Forming a new F1 team is an incredibly involved and expensive process. Even if the potential team has the resources to complete this task, it also has to meet very stringent requirements from the F1’s regulator and commercial rights holder, including paying $200 million upfront.

Any new prospective team has to jump through many “hoops” before the FIA judges them able to compete. They also have to compensate the current F1 teams for the reduction in revenue that will result from a new team joining.

The Process A New Team Follows To Enter F1

Entering F1 as a new team is not for the faint of heart. It requires significant financial and infrastructural resources to be in place before an application is even considered.

From the moment an application is prepared, it may take up to four years before the team can prove that it can fulfill the demands required by the FIA.

While there are 20 cars on the current grid, article 8.6 of the 2021 F1 Sporting Regulations dictates that a maximum of 26 cars will ever be permitted.

It potentially opens up space for three new constructors.

Unfortunately, it is a “sellers’ market” because, at the moment, the governing body is not looking for new participants. As recently as February 2022, they indicated that they are not currently in a position to entertain new applicants.

While that does not preclude prospective entrants from indicating they are interested in being considered if they can make a compelling case, F1’s regulator and commercial rights holder are not actively looking for new entries.

How Does The Process Work?

The FIA is not generally looking for new constructor teams to enter because the grid is also complete.

For a new team to enter, it is usually a requirement that a current team closes up shop and leaves the sport.

If the F1 is interested in entering a new team, it happens in the following way.

There Is A Time Window Where The FIA Invites Applications

The FIA typically opens up a time window from the 21st of October to the 1st of November of the previous year, where the sporting body invites applications.

If an invitation has been made, teams must undertake the following.

New F1 Teams Must Pay An Application Fee

The team must stump up $200 million on application.

Charging the entrance fee serves two purposes.

It Protects Existing F1 Teams Revenue

With the new regulations, provision has been made to safeguard the revenues of current constructors.

The income from commercial rights is distributed to the constructors, which helps fund their programs, and if a new entrant is accepted, there will be a dilution of the existing team’s revenue.

As 10 teams are competing on the Formula 1 grid, a new entrant would reduce the team’s revenue by 10%.

F1 teams create value in many different ways including.

  • Technical knowledge
  • Team dynamics.
  • Fan bases.
  • Sponsor relationships
  • Institutional history.
  • The driver pools.
  • Infrastructure

These are resources that take years to develop, and at the outset, new teams do not have.

Understanding that developing these value metrics does not happen overnight means that the existing teams have an embedded financial value.

The payment of the entrance fee is designed to ensure that new entrants don’t get through the door without acknowledging the value of the existing teams.

This value was demonstrated when the Williams team (the worst-performing team on the grid) was recently sold to Dorilton Capital, costing around $180 million. The price of the top teams such as Ferrari, Red Bull, and Mercedes would be multiples of this number.

It Demonstrates That The New Team Has Resources

Just as the payment recognizes that the existing teams have an embedded value, payment of the $200 million entrance fee also demonstrates that the newcomer has the resources and intention to enter the challenging learning curve that it will face.

It also shows the commitment of the potential new entrant not to make wild claims or unrealistic expectations regarding their performance.

In the past, several American teams who race in the Indy Car series announced that they would be joining the F1 series, after which nothing further was heard.

The New Team Has To Demonstrate They Have The Resources

Once the F1 regulator and commercial rights holder have opened up the application process, there are several administration details that article 8.2 of the 2021 F1 Sporting Regulations requires. These include

  • Confirmation that the team has read and understood the Regulations. And that it agrees that everyone associated with its participation in the championship will observe them.
  • The team’s name and the name of the chassis.
  • The new cars make.
  • Which engine will be used?
  • The driver’s names. The team can submit this afterward if a fee is paid to the FIA.
  • The applicant undertakes to participate in every event with cars and drivers entered.

The FIA carefully considers the applicant’s resources which include:

  • The applicants have sufficient infrastructure.
  • The applicants have the financial means to set up and operate a team
  • The applicant has the human resources
  • The applicant has sufficient experience  to develop and operate a team
  • The applicant must have the technical ability to develop a competitive car
  • The applicant can demonstrate that it has an adequate maintenance capacity.

Once the information has been prepared, the FIA carefully considers the merits of the applications.

Once the evaluation has been completed, the FIA has the absolute, non-negotiable right to accept or reject the proposal at their discretion.

Editorial credit: Abdul Razak Latif / Shutterstock.com

When Will New Team Applications Be Considered?

The last new team to enter F1 was Haas in 2016, and since then, despite interest from some parties, there have been no further inquiries.

That is until Mario and Michael Andretti expressed interest in starting a new F1 team effective 2024.

While the F1 regulator and commercial rights holder has indicated that it is not looking for a new team, Michael Andretti’s company Andretti Motorsport demonstrates they have the capacity. With the 1978 F1 champion,  Mario Andretti, they certainly have the experience.

Although the FIA has indicated they are not taking applications, the Andretti’s have lodged their interest expression, which hopefully they will consider.

Conclusion

If the opportunity to open up the ranks and welcome a new constructor into the F1 ranks, the new team will have to pay $200 million and demonstrate that they have the requisite infrastructure, financial means,  human resources,  sufficient experience, and technical ability, and an adequate maintenance capacity.

By imposing these roadblocks on new entrants, Formula 1 has been able to keep its position as the pinnacle discipline of motor racing. While it is frustrating for new entrants, the requirements maintain the quality of the participants.

References

https://www.motorsportmagazine.com/articles/opinions/why-new-teams-are-needed-to-keep-f1-healthy

https://the-race.com/formula-1/fia-not-in-position-to-consider-new-f1-teams-amid-andretti-bid/

https://www.autosport.com/f1/news/new-teams-will-have-to-pay-200m-to-join-f1-grid-for-dilution-fund-4979172/4979172/

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