
The pending arrival of Cadillac in Formula 1 will have financial implications for the other 10 teams on the grid.
Following a year of stand-off between the GM-backed Andretti team and Formula One Management (FOM), the evolution of the Andretti entry into a full-scale GM entity under the Cadillac brand saw the American manufacturer reach an agreement in principle to join the grid in F1 2026.
Toto Wolff: The compensation fee is too low
In order to join Formula 1, burgeoning teams must pay an ‘anti-dilution fee’ in order to compensate the other 10 teams on the grid for the impact of its arrival on the prize fund.
The fee, introduced in the most recent Concorde Agreement – the commercial terms between Formula 1 and the teams – would thus be dispersed between the arriving team’s competitors in order to help massage the impact of the added dilution of the prize fund.
This fee was originally set at $200 million in 2020, but this figure was quickly viewed as being too low due to the huge rise in valuations for the F1 teams following the success in growing global audiences as the Drive to Survive effect took hold – the biggest teams are now valued in multiple billions of dollars.
The low figure led to many of the teams expressing negativity towards the potential Andretti entry, but the figure GM will pay is more than double, according to more recent reports.
Last month, Cadillac confirmed it has secured the services of former Manor/Marussia team boss Graeme Lowdon as its team principal, with Lowdon set to ramp up the squad’s preparations for F1 2026 as well as helping the outfit justify the outlay of $450 million, a separate sum from all of its own investment.
But while $450 million may seem eye-watering, the new figure is still too low, Mercedes‘ team boss Toto Wolff has opined in an interview with Germany’s Auto Motor und Sport.
“When you look at it in the first instance, we lose out,” Wolff said, explaining the fee as being insufficient to offset.
“We don’t know what Cadillac will invest in Formula 1.
“The compensation fee, which is currently set at $450 million, is too low. It does not make up for the direct loss in income.”
The potential impact of the dilution on the revenue streams and share prices of the existing 10 teams means the $450 million payment, despite the increase, doesn’t adequately compensate, Wolff believes.
It’s for this reason that Wolff is eager to see Cadillac make a significant impact on Formula 1, by investing properly and helping to elevate the value of the sport further.
“Only time will tell what value the sport gains from having an 11th participant,” Wolff said.
“If the sport’s value increases, then everyone benefits. But we just don’t know yet. No one has spoken to me about Cadillac’s exact plans.
“If Cadillac enters now with a works team and invests an appropriate marketing budget into Formula 1, it will be a valuable addition to the sport.”
More on Cadillac’s pending arrival into Formula 1
👉 Cadillac F1: Five drivers we’d love to see join the new American team
👉 Four reasons why GM’s huge F1 arrival makes so much sense
With the impact of the arrival yet to be fully figured out, Wolff revealed how Formula 1 has managed to achieve financial stability for its competitors over recent years, helped considerably by the introduction of a performance-related budget cap in 2021.
Mercedes are making a “solid profit”, Wolff revealed, saying, “Our profitability margin stands at 30 to 35 percent before tax. This even offsets our expenditures on the engine.
“The old cliché that Formula 1 is just a money pit is a thing of the past. In summary, Formula 1 has never been as financially healthy as it is today.”
Eight months ago, documentation released by the UK’s Companies House revealed the latest on the financial situation of the Mercedes F1 team, covering the 2023 season.
Mercedes-Benz Grand Prix Ltd. declared a turnover of £546.5 million for 2023, which is an increase of £71.9 million over its 2022 figures.
Despite turnover increasing by just over a sixth, Mercedes’ profits took a small dip from the 2022 figure of £89.7 million – their 2023 profit was £83.8 million.
Throughout 2023, Mercedes paid out £75 million to shareholders, up from £55.2 million in 2022.
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