BusyFormula #009: Is the budget cap hurting Mercedes more than they are letting on? (Part 1 of 2)

Is the budget cap hurting Mercedes more than they are letting on (Part 1 of 2) image 1

The 2021 Formula1 season looks set to go down in history as one of the most exciting seasons in modern F1 history. This is because of the battle raging both on and off-track between the two leading title contenders, Mercedes and Red Bull.

This battle for supremacy between the two F1 giants has played out on track as a battle between the two greatest drivers of their generations, seven-time World Champion Sir Lewis Hamilton and his would-be usurper, F1 protégé Max Verstappen.

Off the track, the championship battle is embodied by the ongoing wrangle between the two teams’ principles, Toto Wolff and Christian Horner. Mercedes accused Red Bull of running an illegal “bendy” rear wing for the first six races of the season, a conflict that was resolved at the last race at Paul Ricard when Red Bull was forced to change its rear wings to comply with the FIA’s directive.

Furthermore, Red Bull has been busy behind the scenes poaching Mercedes engineers from HPP to staff their new power train division at Milton Keynes to add more fuel to the fire. All this drama has been entertaining for the fans and pundits alike, but I wonder whether it is all just a distraction from what is really going on at Mercedes.

Is Mercedes no longer invincible under pressure?

This is the most pressure the Mercedes team has faced from a competitor since the dawn of the hybrid era in which they have won all drivers and constructors’ championships so far.

Many will reference the challenge Sebastian Vettel and Ferrari put up in 2017 and 2018, in which they arguably had the faster car but capitulated in the second half of both seasons. While Ferrari certainly put a good fight, it never really looked like Mercedes ever panicked or cracked under Ferrari’s pressure.

In fact, the opposite happened. Mercedes upped their game, eliminated errors and mistakes from their operations, and ran like a well-oiled German machine. That show of form got many thinking that Mercedes were invincible and the best team in Formula1.

Fast forward to 2021, and the picture looks very different. Pressure from Red Bull has resulted in Mercedes making mistakes with their strategy on track, as witnessed the last time out at the French Grand Prix. Not only that but the reigning World Champion, Hamilton, who is arguably the most reliable driver on the grid, is making mistakes (Imola and Baku come to mind here).

This change in demeanor from the Mercedes outfit has got me wondering whether Mercedes are rattled by more than the pace shown by Red Bull this season. Sure the regulations have gone against them, and yes, they still need time to understand their car, but is that all there is to it?

Could that explain why Toto Wolff has stated repeatedly that Mercedes has no plans to develop their 2021 car despite Mercedes trackside engineering director Andrew Shovlin admitting in April that the W012 had no advantages over Red Bull’s RB16 B? The short answer to this question is no.

My intuition tells me that this lack of confidence from the Mercedes garage is a sign of a lack of hope of catching the fast-flying Red Bulls. Furthermore, I believe that the lack of hope stems from Mercedes not having the financial resources available to them in prior seasons. I think that this battle is being shaped behind the scenes by the budget cap introduced by Formula1 for the 2021 season.

Is the budget cap hurting Mercedes?

Mercedes F1 team is one of the biggest Formula1 teams of the hybrid era. By winning all the championships in this era, they have dominated the sport like no other team has in any previous era. This dominance has helped grow the team’s financial might, as it has attracted some of the best sponsors available in F1. Brands like Bose, Crowdstrike, Monster Energy, Tommy Hilfiger, Petronas, and Ineos are just a few big companies paying big bucks in advertising fees to the team.

This recent prominence means that Mercedes has had one of the biggest budgets of any team on the grid in recent years. For instance, in 2019, the Mercedes F1 team reported a budget of $484 million, the highest in the sport that year. While this budget was the highest in the sport, it was comparable to the budgets of the next two big teams, Ferrari ($463 million) and Red Bull ($445 million).

However, while it is comparable to the others in the top three, Mercedes’ budget is a far cry from the rest of the teams on the grid that averaged $188 million among them. This means that the top three teams spent more than twice what the other seven were spending on average in 2019.

Even a superficial look at these numbers will begin to show what might be causing the apparent hopelessness within the Mercedes team at the moment. With a budget cap of $145 million, I don’t believe Mercedes believe they have enough room to innovate to catch Red Bull this year.

Let’s not forget that this team brought two different chassis to pre-season testing in 2019. They are not afraid to innovate to fight for the championship. But with the budget cap in 2021, one wonders whether they are simply incapable of innovating because they are already on the limit.

[Read Part 2 of 2 here]

Julius Kakwenzire is a self-confessed F1 addict. When he’s not getting emotional at the race track’s proceedings, he’s working on great fintech products at Lupiiya.

Kakwenzire Julius