The Business of Owning a Formula 1 Team

When General Motors announced in 2024 that it would be entering Formula 1 as a constructor through the Cadillac brand, the reaction from the existing teams was surprising. Rather than welcoming a new competitor, several of the established teams lobbied against the entry. The reason had nothing to do with racing. It had everything to do with money. A new team on the grid means the prize fund gets split one more way, and in Formula 1, the commercial structure is so precisely engineered that every additional share matters enormously.

That reaction tells you almost everything you need to know about the business of owning a Formula 1 team. On the surface it looks like a sport. Underneath it is one of the most complex and expensive commercial operations in professional athletics, where the gap between winning and losing is measured not just in seconds but in hundreds of millions of dollars.

The starting point is cost. Running a competitive Formula 1 team is extraordinarily expensive. The budget cap introduced in 2021 set a limit of 145 million dollars per year for most operational costs, and even that figure, designed to bring spending under control, is a number that only a handful of organisations in the world could comfortably absorb. Before the cap, top teams like Mercedes and Ferrari were spending upwards of 400 million dollars a season. The cap brought costs down but did not change the fundamental reality. Formula 1 remains one of the most capital intensive sports on earth.

Where does the money come from? The answer is a combination of three things: the commercial prize fund distributed by Formula 1's parent company Liberty Media, sponsorship revenues, and in some cases the financial backing of a parent manufacturer. The prize fund is distributed based on a combination of historical performance and current results, which means the teams that have been around longest and finished highest tend to receive the largest shares. This is one of the reasons why Ferrari, regardless of how it performs in a given season, remains one of the most commercially powerful teams on the grid. Its history guarantees it a level of income that newer teams cannot access.

Sponsorship is where the largest sums move. A title sponsorship on a leading Formula 1 car can be worth anywhere from 50 to 100 million dollars per year. The sport's expanded global audience, driven in large part by the Netflix series Drive to Survive and the addition of races in the United States, Saudi Arabia and Las Vegas, has made it significantly more attractive to brands looking for international reach. Companies that had no interest in Formula 1 a decade ago are now competing for space on cars and driver overalls. That shift has driven sponsorship valuations sharply upward, and the teams that have managed to position themselves as global lifestyle brands rather than purely racing operations have benefited most.

The manufacturer model operates differently. Teams like Mercedes, Ferrari and Red Bull's relationship with Honda exist within a larger commercial logic where the racing programme serves the parent brand's marketing and engineering ambitions. For these organisations, the return on investment is not calculated purely in prize money and sponsorship. It is calculated in what winning at the highest level of motorsport communicates about the brand to consumers around the world. Ferrari does not need to win every championship to justify its Formula 1 programme. The association with competition, performance and Italian excellence is itself worth billions in brand value.

What has changed in recent years is the arrival of a different kind of owner. Private equity and ultra high net worth individuals have identified Formula 1 teams as assets worth acquiring, and valuations have followed. Lawrence Stroll's acquisition of a stake in what became Aston Martin, Dorilton Capital's purchase of Williams, and the ongoing interest from American investors in various teams have all demonstrated that the market for Formula 1 ownership has matured significantly. These buyers are not motorsport enthusiasts making an expensive hobby out of their wealth. They are investors who see a sport with rising revenues, a growing global audience and a structural scarcity of available assets. There are only ten teams on the grid. That scarcity alone drives valuations upward.

Owning a Formula 1 team has never been a straightforward path to profit. The costs are immense, the competition is relentless and the margins are thin even for the most successful operations. But the asset value has never been higher, the commercial landscape has never been more favourable, and the global audience has never been larger. That combination is exactly what makes F1 ownership so attractive to private equity firms, institutions and wealthy individuals today.