Will Red Bull’s overspend penalty shake up F1’s racing order?

As much as Formula One is about fast cars and drivers, it is also an arms race — teams have to fund development right through the year in the pursuit of minute improvements in lap-time.

These fractional gains — in the order of tenths of a second — cost millions of dollars. Only teams with deep pockets can afford it. This has created a two-tier system: the wealthy teams can spend their way out of trouble and pocket a major portion of the prize money while the less-wealthy can’t invest enough to compete.

To bring teams closer together in terms of competitiveness, the FIA and Formula One introduced a budget cap, limiting how much teams can spend; this cap did not apply to certain expenses such as salaries of the drivers and the top three executives, and marketing spending.

The budget cap was set at $145 million for the 2021 season, with further reductions in the cap for 2022 and 2023. While most teams did not find compliance difficult — they never had big budgets in the first place — Red Bull, Ferrari and Mercedes had to cut costs and staff since they were accustomed to spending far in excess of the cap.

The importance of penalties

An important aspect of the regulations were the penalties for breaches. This included reprimands, fines, testing restrictions, a smaller budget cap for future seasons and even points reductions for the year in which the offence was committed.

Just a day after Max Verstappen sealed his second world drivers’ title, the FIA announced that Red Bull had been adjudged to be in breach of the regulations in 2021.

The team was found to be close to $2.2 million over the cap. However, the FIA also said that had a tax credit been applied correctly, it would have been over by about half a million dollars only. But irrespective of the amount, the fact that the team had breached the regulations meant that the FIA had to act swiftly to ensure the punishment both met the crime and acted as a deterrent.

Last week, ahead of the Mexico City Grand Prix, Red Bull was handed a $7 million fine and a 10% reduction in aerodynamic testing.

This was after the team entered into an ‘Accepted Breach Agreement’ (ABA) with the FIA wherein the team admits wrongdoing and waives the chance to appeal; punishments handed out under the ABA are less severe — they don’t include points reduction, for instance.

While the size of the fine is not something a team of Red Bull’s resources would lose sleep over, the sporting penalty — the restrictions on testing — could be another matter. It has sparked diverging views, with Red Bull and its rivals poles apart in their assessment of what the on-track consequences could be.

Breaking it down

So, what do these restrictions really mean? And can they change the competitive order over the next two seasons?

Aerodynamics plays a huge role in F1, influencing the car’s ability to go through corners at high speeds. This is because of a phenomenon known as downforce, in which the air flowing over the car presses it to the track surface, creating more grip. Every part of the car, from front to back, is designed to ensure the airflow around the car is directed in a way that maximises downforce.

The way teams nail these concepts is by testing parts on a scaled-down car model in a wind tunnel, which is one of the most important physical infrastructures for an F1 team. When there are issues with the wind tunnel data and it does not correspond with what is seen on the track, teams usually find themselves in big trouble.

Red Bull now faces a double whammy because of a rule the F1 introduced a few years ago. As another measure to reduce the gap between teams, the time for wind tunnel and Computational Fluid Dynamics (CFD) testing was rationed. The team finishing last got the most time. This time reduced progressively, on a sliding scale, as you moved up the constructors’ standings.  

Having won the 2022 title, Red Bull was set to receive only 70% of a baseline amount of wind tunnel time and CFD runs. Now, with the 10% penalty applied to its 70%, it will have only 63%.

This penalty will run for a 12-month period until next October, and in this time, Red Bull will have 22 fewer runs on a wind tunnel and 140 fewer items it can run on its CFD.

The effect on lap-time

Red Bull boss Christian Horner called the testing restriction “draconian” and said it could cost the team close to half a second in lap-time. However, rivals termed it an exaggeration and felt Red Bull got away lightly as the restrictions could at most cost a team a tenth or two-tenths.

Considering that Red Bull has had the fastest car this year, with a quarter of a second advantage on average, it seems well placed to deal with any potential impact of the penalty. 

But having said that, since the restriction is over a 12-month period, the team will have a slight disadvantage in developing its 2024 car — work on a new car often has long lead times. It will need to figure out a way to not just maintain the level next year but also not fall behind in the following year.

The team has dodged a bullet with the monetary fine, in the sense that it is a standalone penalty, not something that comes out of its budget cap for next year. A few rival teams, such as Ferrari, have pointed out that reducing the team’s budget cap would have been a fairer penalty; they felt the current punishment isn’t strict enough. 

With the same budget cap, the team now can refocus its resources on areas outside wind tunnel and CFD testing such as car-weight reduction, which can offer massive gains.

More to the point, Red Bull has access to the genius of Adrian Newey, its chief technical officer who is widely regarded as the best in the sport’s history at understanding aerodynamics. Seen in this light, there isn’t a team better suited to dealing with restrictions on aero testing.

While Red Bull’s rivals would have desired stricter action, the process has shown that the regulation, in theory, can work. It was important for the FIA to draw a line in the sand, even for a minor breach. The governing body, having demonstrated a degree of transparency in dealing with the matter, can claim that the letter and spirit of the regulation have been preserved.

If the penalty acts as a strong deterrent, it greatly improves the chances of the budget cap succeeding. A transformative step to level the playing field, the regulation has the potential to make the sport more exciting and commercially attractive for all its stakeholders. This will ensure F1’s edifice holds strong and doesn’t crumble. So while the penalty has generated some ill will in the paddock, it could prove beneficial for the sport over the long term.