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Formula 1

Mercedes’ record-breaking titles cost manufacturer less than £30m

by Matt Beer
3 min read

Mercedes’ record-breaking sixth consecutive Formula 1 title double cost the manufacturer less than £30m in 2019, while the team recorded increased revenue and profit.

Lewis Hamilton and Valtteri Bottas finished first and second in the world championship last year as Mercedes swept to a crushing drivers’ and constructors’ double, continuing its domination of the V6 turbo-hybrid era.

The F1 team’s newly-published accounts reveal that higher sponsorship and marketing revenue meant turnover increased from £338.4m in 2018 to £363.3m in 2019, and the post-tax profit rose by £2m to £14.7m.

Expense increased as Mercedes recruited for and invested in its Applied Science business division, particularly the Americas Cup project.

Applied Science was formed last year and will be an important way for the team to reallocate staff ahead of the incoming 2021 F1 budget cap.

The value the team continues to provide to parent company Daimler is more impressive than ever, as the net input into the organisation dropped to below £30m.

Mercedes-Benz AG provided £44.4m to the team in 2019 but £16m was returned, reflecting a net cost of £28.4m.

In return, the F1 team made “an important contribution” to the ongoing growth in the value of the Mercedes-Benz brand.

Mercedes’ financial report states the team enjoyed 23.86% of television coverage during the season, generating a cumulative television value advertising equivalent of $5.4bn for all its partners.

Speculation earlier this year suggested heavily that Mercedes could withdraw from F1 as a works team but that has regularly been scotched by the likes of Toto Wolff and Daimler chief Ola Kallenius.

Motor Racing Formula One World Championship Italian Grand Prix Practice Day Monza, Italy

It should have been put to bed by Mercedes signing the new Concorde Agreement that will run to 2025, even though some will make it an annual story on the grounds that there is a yearly opportunity to withdraw within the new commercial and governance terms.

However, the 2019 accounts show that Wolff’s ultimate ambition to make the F1 team cost neutral to Daimler is founded in reality. When the budget cap comes in and expenses drop, that will surely be a formality – even if Mercedes’ crushing dominance doesn’t continue quite in its current vein.

These accounts may only present a snapshot in time, reflecting the events of 2019, but there is a clear trend that shows why F1 has been tremendous value to Mercedes.

It’s also evidence that, even at a time of cost-saving in an uncertain global context, continuing to compete in F1 makes more sense than withdrawing.

Further success in 2020, even in the COVID-19 pandemic and the impact that will have on F1’s revenue and therefore team income, is likely to underline that even if the headline numbers are slightly worse.

“Despite the 2020 known adverse prize money financial impact driven by the effect on Formula 1 calendar, the company is able to maintain profitability and to meet all financial obligations,” the accounts note.

There’s never 100% guarantee that financial support from a parent company will continue endlessly, especially in F1.

But equally there is no reason to believe it is going to stop. These numbers are a ringing endorsement of ongoing investment being worthwhile.

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