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Formula 1: Manpower, Tech, and Money

Private Equity Analyst, RocSearch
Nov 18, 2018 4:41 AM 4 min read

Editor’s Note: This article is the first of a series on Formula1 (F1) Racing. In the coming weeks, this column will attempt to understand F1 – the game, its regulations, management and the underlying economics.


For many, F1 is just where the fastest car wins.


However, the astounding man-hours, the technology, and the money that goes into building an F1 car is staggering.


How staggering? For starters, it costs around $8 million apiece. Each car is fitted with over 200 sensors and over a kilometer of wiring. Impressed?


With the last F1 Grand Prix of the year scheduled to unleash by this month-end, I will try to breakdown how F1 operates, hoping that you’d be fascinated enough to tune into the upcoming race.




F1 is the highest level in single seat racing. The first official championship points’ contested F1 race was held at Silverstone, UK in 1950. Today, each racing team, known as ‘constructors’ has 2 cars on the grid with 2 drivers each, and additional 1-2 reserve drivers.


At present, there are 10 racing teams, which means 20 racing drivers who compete in 21 races over the world. The above figures are specific to 2018. It may change depending on next year’s revised race calendar.

 Formula 1: Manpower, Tech, and Money

There are 2 championships to be won – ‘The Driver’s Championship’ and ‘The Constructor’s Championship’.


Each driver is rewarded a point based on the position he finishes at: 25 for the driver who finishes first and 1 for the driver who finishes last. Every constructor receives the same points as the driver.


The driver and the team with the greatest number of points at the end of the Championship are declared the winners.


All competitive racing divisions, single seat (Formula1, Formula2, Formula3000, GP2 etc.) and double seat (World Endurance Championship, World Rally Championship etc.) are governed by Federation Internationale de l’Automobile (FIA).


Can Anyone Build a Fast Car and Win?


Not really. The FIA strongly controls regulations around a car that can be raced. In fact, The “Formula” in F1 refers to the stringent set of rules to which participating cars must comply.


The idea is to ensure a level playing field much like in boxing, where you can’t field a flyweight vs a heavyweight.


Every car is identical in terms of its dimensions (length and width of the car, the front and rear wings, tires, etc.), the engine and its specifics, the electronics. So much so that the fuel and tires to be used are also predefined.


Since 2014, the V6-hybrid engines are being used. The Power unit (i.e. the engine) consists of 6 elements – the Internal Combustion Engine (ICE), Motor Generator Unit-Heat (MGU-H), Motor Generator Unit Kinetic (MGU-K), Energy Store (ES), Turbocharger (TC), and Control Electronics (CE).

 Formula 1: Manpower, Tech, and Money

These engines use a clever technology called the Energy Recovery System (ERS) which recovers and redeploys the car’s heat energy from the exhaust and brakes, that would have otherwise gone waste.


This energy is used during a lap as per the driver’s discretion and can give up to an additional 160 horsepower to the driver.


More details about the Power unit and ERS can be found here.


How is The ‘Formula’ Enforced?


FIA attaches a seal to each element within the Power unit before the race to ensure no parts can be rebuilt or replaced.


Each driver is permitted to use three Internal Combustion Engines (ICE), Motor Generator Unit-Heat (MGU-H) and Turbocharger (TC) and two Energy Store (ES), Control Electronics (CE) and Motor Generator Unit- Kinetic MGU-K per season.


Any additional unit used over the pre-specified number results in a 10-place starting grid penalty for the current race (If changed during the race weekend, before the race) or in the next race (If changed after the previous race weekend).


Technical Rules


The ICE must be 1.6L in capacity, and rev-limited to 15,000RPM (Revolutions per minute). Fuel flow to the engine is limited to 100 kilograms/hour, to ensure every car has the same supply of fuel. The use of any device, other than the engine and one MGU-K, to propel the car is not permitted.


Additional technical and sporting regulations can be found here


Constructors can design and use every component of the car by themselves (called works team or factory team) or buy it from another team or supplier. Currently there are only 3 works teams on the F1 grid – Mercedes, Scuderia Ferrari and Renault.

 Formula 1: Manpower, Tech, and Money

Williams and Racing Point Force India buy their engines from Mercedes (The latter also buys gearboxes from Mercedes). They develop the rest of the car in-house.


Haas buys the suspension, gearbox, engine, hydraulics and all electronic components from Ferrari.


Sauber has a similar agreement like Racing Point Force India of purchasing engines and gearboxes from Ferrari.


McLaren and Red Bull Racing buy engines from Renault, and Scuderia Toro Rosso buy engines from Honda, in an exclusive deal. Red Bull Racing will shift to Honda engines from 2019.


Formula One, in 2017, also launched its eSports Series that will allow gamers and fans to compete for the title of ‘Formula1 eSports Series World Champion’. This not only popularizes the sport further but taps on a new avenue for in-game sponsorship and revenue.


The economics of the game get even more interesting. Stay tuned for that and more.


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