Why F1 will make Volkswagen even richer (with more German drivers on the grid too) — MPH


Formula 1's new commercial arrangements meant that Volkswagen's decision to enter the series with Audi and Porsche was a no-brainer, writes Mark Hughes

Porsche pit sign

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Volkswagen CEO Herbert Diess was very open last week in his YouTube interview with the citizens of Wolfsburg (home of VW) following the official confirmation that the company’s brands Porsche and Audi are indeed planning to enter F1 – with separate programmes – from 2026.

It’s all about money, as far as he is concerned. Audi and Porsche are run as separate entities from parent company VW, which effectively underwrites their activities in return for a contribution to the bottom line of the group. “Audi transfers four to five billion [Euros] a year to Wolfsburg,” he said. (Porsche contributed around eight billion last year).

Impressive numbers, and in the past that might have been why they could have ‘afforded’ an F1 programme. But with F1’s new, cost-controlled, commercial model, it’s actually potentially better than that. “Audi will transfer more [to VW] with F1 than without,” believes Diess.

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With the cost cap in place, a team’s share of F1’s revenue should in theory be significantly in excess of the cost of competing. Ten teams sharing an estimated £1.2 billion annually makes an average payment of £120 million per team, with the cost cap set to glide down to £100 million by next year. In theory – and with a lot of assumptions about F1’s future income streams – a team should be very profitable even without sponsorship. F1 team ownership has effectively become a franchise of a very successful business – and so the valuations of existing teams have sky-rocketed of late. Those 10 team owners are naturally not keen to slice that lucrative pie any thinner by allowing additional teams in – and there seems no great impetus from the FIA to invite new entries.

Hence Porsche’s likely teaming up with Red Bull – and Audi’s search for an existing team to buy into. VW board’s approval of the move into F1 was not unanimous, Diess emphasised, but the logic of it was felt to be overwhelming. “If it transfers more to [the group] with F1 than without, then you simply run out of arguments.

“You can say, ‘But I don’t believe in Formula 1,’ but there are good arguments that say Formula 1 will grow, even in the future. Why should you restrict them, if they then deliver more money?… We have enough to do and we don’t really need to do Formula 1 but our premium brands say that’s the most important lever to increase the brand value and to be able to take a little bit more for the cars in terms of pricing. And also to demonstrate to the [marketplace] competition that you have superior technology.

Volkswagen electric future poster

VW Group has invested billions in electric vehicles and its decision to enter F1 wasn’t unanimous

Bloomberg via Getty Images

“If you do motor sport, you should do Formula 1 as that’s where the impact is greatest. What’s more, you can’t enter Formula 1 unless a technology window opens up which means, in order to get in there, a rule change so that everyone starts again from the same place.” Which – under VW’s heavy influence – is what we will have for 2026 with the deletion of ERS-H and the big increase in electrical power.

“That’s why the Board of Management and the Supervisory Board have all voted in favour of this,” continued Diess. “Audi still has to decide in which constellation and with which team, but both have started to develop engines.”

The company boss went on to express hope that his teams might employ German drivers – and that there would be a return of a German Grand Prix to the calendar. The VW Group’s entry to F1 is clearly going to carry a lot of weight and its impact on centre of gravity and culture of the sport is going to be interesting to observe.