Honda website
Honda website

SEPTEMBER 18, 2000

The economics of Grand Prix racing

THERE are times when it is hard to understand the finances of Formula 1 racing. Last week Ferrari announced its half-yearly results with sales of 2,200 Ferraris and 1,200 Maseratis. This gave the company a turnover of around $450m for the first six months of the year and means that Ferrari will probably turn over around $1bn this year. Profit in the first six months, however, was only $10m. Much of the profit is eaten up by the Ferrari F1 program, which is estimated to soak up as much as $200m a year although sponsors Marlboro and Shell are believed to pay around half of the costs for the team. This is fine as long as the firm remains under the control of the Agnelli Family but if plans to float the company ever come to fruition there will inevitably be demand for more return for shareholders. Ferrari does not want to increase the number of cars being produced for fear of losing some of the cachet associated with the marque and so the main aim is to increase Maserati sales and to diversify into other businesses, such as financial services and insurance. Ferrari is expected to announce shortly that it is building limited edition high technology bicycles. The carbon composite machines have been designed by bicycle racer Ernesto Colnago.

At the same time a successful Formula 1 team is worth a great deal of money. The recently-announced half yearly financial results of the Benetton company have revealed that the Italian clothing firm received $82.4m from the sale of its Formula 1 team to Renault.

The deal will continue to see the team run in Benetton colors for the 2001 season before it becomes Renault-branded in 2002. This means that Benetton gained an additional sponsorship deal worth in the region of $20m giving the team an overall value of around $100m.