Carmakers like Honda, BMW, Toyota go missing from Formula 1 lineupMUMBAI: For a sport that pivots around cars, Formula 1's ability to draw and keep their manufacturers is cyclical and, in the current season, at its lowest in its 61-year history. Just two of the 12 teams in what is the pinnacle of motor sport today are owned and managed by car manufacturers: Ferrari and Mercedes. A third manufacturer, Renault, has a part involvement, as an engine supplier to other teams. Contrast this to, say, 2005, when seven of the 10 teams were car manufacturers. What changed? Sentiment changed. The 2008-09 credit squeeze made car manufacturers take a hard look at what they were getting in relation to what they were spending. Amid acute business pressure, Honda, BMW and Toyota became manufacturers number 12, 13 and 14 to leave the sport following a failure to crack the brutal paradox of F1: winning makes teams financially viable; but to win, teams need to spend. Elsewhere, Renault scaled back from running a team to being an engine manufacturer. "In order to conserve financial and engineering resources for their passenger-car operations, they moved out of F1," says Ashish Sinharoy, vice-president, communications and corporate affairs, Renault India, of the departures in general. The savings were significant, given the economic backdrop. Take Toyota, which was the last car manufacturer to enter the sport, in 2002. It did so with a budget that matched veteran -- and frontrunning -- teams like Ferrari and Mercedes. The company declined to disclose its budget, but industry estimates put it at $350-500 million a year. Part of Toyota's budget was funded by sponsorships. However, the economics and reasoning for the Japanese company went off track as prize money and revenue sharing - the quantum of which are an outcome of performance, and which feed sponsorships - were conspicuously absent. Toyota drivers stood on the podium 13 times in the 139 races it participated in. This strike rate would be becoming of a team eight years old. But it was considered a failure for Toyota given the money they were throwing. For a company that had revenues of $208 billion and a marketing spend of $15 billion in 2009, it was easy to bankroll its F1 operations for eight years.

MUMBAI: For a sport that pivots around cars, Formula 1's ability to draw and keep their manufacturers is cyclical and, in the current season, at its lowest in its 61-year history.

Just two of the 12 teams in what is the pinnacle of motor sport today are owned and managed by car manufacturers: Ferrari and Mercedes. A third manufacturer, Renault, has a part involvement, as an engine supplier to other teams.
Contrast this to, say, 2005, when seven of the 10 teams were car manufacturers. What changed? Sentiment changed.

The 2008-09 credit squeeze made car manufacturers take a hard look at what they were getting in relation to what they were spending.

Amid acute business pressure, Honda, BMW and Toyota became manufacturers number 12, 13 and 14 to leave the sport following a failure to crack the brutal paradox of F1: winning makes teams financially viable; but to win, teams need to spend.

Elsewhere, Renault scaled back from running a team to being an engine manufacturer. "In order to conserve financial and engineering resources for their passenger-car operations, they moved out of F1," says Ashish Sinharoy, vice-president, communications and corporate affairs, Renault India, of the departures in general.

The savings were significant, given the economic backdrop. Take Toyota, which was the last car manufacturer to enter the sport, in 2002. It did so with a budget that matched veteran -- and frontrunning -- teams like Ferrari and Mercedes.

The company declined to disclose its budget, but industry estimates put it at $350-500 million a year. Part of Toyota's budget was funded by sponsorships.

However, the economics and reasoning for the Japanese company went off track as prize money and revenue sharing - the quantum of which are an outcome of performance, and which feed sponsorships - were conspicuously absent. Toyota drivers stood on the podium 13 times in the 139 races it participated in.

This strike rate would be becoming of a team eight years old. But it was considered a failure for Toyota given the money they were throwing. For a company that had revenues of $208 billion and a marketing spend of $15 billion in 2009, it was easy to bankroll its F1 operations for eight years. 
GAURAV KUMAR
PGDM 3RD