Each competing team in Formula One requires skilled engineers and skilled drivers. However, a team’s expenses do not stop at engineers and drivers. A Formula One team must deposit a hefty sum of money to compete in F1 races and develop their cars. When fans figure out how many expenses a single Formula One team has to carry, they often find themselves wondering whether these teams generate a profit.
McLaren is one such popular, high investing team that ranks among the oldest teams in Formula One and has competed in every F1 series since 1966. The New Zealand Racer, Bruce Mclaren established the Mclaren Formula One team.
Within four years of the formation of the team, McLaren managed to win its first world championship. In 2019, the Mclaren has a budget of over 200 million dollars. The figure speaks volumes about their expenses. Fans and critics have been curious whether the McLaren Formula One team can generate a profit after keeping up with their expenses. If you have the same question, read this article to find all your answers!
Table of Contents
The fall and rise of the McLaren F1 team.
Does the McLaren F1 team produce a profit?
The McLaren Formula One team ranks among the top five teams that generate the most profit. The McLaren CEO remarked that it is predicted that the McLaren Formula team will be worth billions of dollars in the next five years. The McLaren Formula team manages to produce a significant amount of profit every year.
Key takeaways
- Formula One is one of the largest industries to exist and generates a massive revenue annually
- Each team that competes in Formula One has to spend a significant amount of its profit to keep up with its expenses. The expenses a Formula One team has to keep up with include engines, engineers, manufacturers, clothing, hunting down the best of the best racers, research and car development.
- Formula One Management indeed pays a lot. However, the amount they pay is usually not enough to keep up with a Formula One team’s expenses.
- To manage their expenses wisely, a Formula One team earns through numerous means such as sponsorships, brand endorsements, etc.
- It is predicted that the McLaren Formula team will be worth billions of dollars in the next five years
- The larger the team and the better a team performs directly leads to more revenue and a higher amount of sponsorships
- Generally, a Formula One team has around fifteen to twenty sponsors
- McLaren earns a significant amount of its profit via sponsorships and brand endorsements. The McLaren team is sponsored by leading brands like Google, Logitech, FreeFire, Coca-Cola, etc.
Understanding how McLaren F1 earns their money
The racing industry has transformed into a full-fledged business and employs thousands of people yearly. Teams must generate a sufficient amount of money per year to keep up with their expenses, which include research work, developing cars, hiring engineers, etc.
Formula One teams generate revenue in numerous ways. Formula One teams such as McLaren earn a sufficient amount of money through funds from the Formula One management, prize money, brand endorsements, sponsorships and partnerships. Although Formula One teams earn through other sources, the mentioned means are their primary ways of earning.
Below, we have broken down the various ways through which the leading Formula One team, McLaren, earns their money.
Formula One Management Payments
The most significant way McLaren earns money is through Formula One Management Payments. A team is paid in a five-step process and this is the primary source of earnings for most teams, including McLaren.
Initially, an amount of thirty-six million dollars is deposited to each competing Formula One team that classifies for over two seasons. This amount is referred to as the division one payment and is granted to each Formula One team. The thirty-six million dollar payment is given to teams simply for participating in the Formula One season. Formula One Management gathers this amount via revenue sources such as circuit sponsorship and TV rights.
The next payment depends upon the performance of the specific team. Every competing Formula One team is awarded a cash prize according to their ranking/position in the most recent Formula One event.
In addition to that, the third division payment does not relate to the McLaren team. The third division payment is awarded to the Long-standing team, Ferrari. As per the third division payment, Ferrari is granted sixty-eight million annually.
However, what we mention next is how McLaren earns a significant amount of money. The CCD or Constructors Championship Bonus is awarded to leading teams like McLaren, Ferrari, Redbull, etc. This bonus awarded to leading teams is worth thirty-five million dollars.
Sponsorships And Brand Endorsements
This method of generating money is self-explanatory. Formula One teams earn a huge sum of money via Sponsorships and Brand Endorsements. In the simplest terms, a sponsorship is when a company approaches a Formula One team to seek promotion in exchange for money.
A company planning on getting involved in a Formula One team by sponsoring them would pay the Formula One team an amount that the team and sponsor mutually decides. After depositing a certain amount, the Formula One team would promote the services of the sponsor on the team’s clothing, the team’s car, helmet and more.
Typically, a Formula One team has around fifteen to twenty sponsors. The Mclaren team has managed to upkeep its reputation and is one of the most successful teams in Formula One. There is no doubt that the McLaren Formula One team attracts numerous sponsors. In the most recent 2022 Formula One season, over forty companies sponsored the Mclaren team. These leading companies include Google, Logitech, FreeFire, Coca-Cola, etc.
McLaren displays the sponsor’s logos and branding on McLaren race cars, clothing, driver bottles, race suits, pit crews, pit stands and other visible areas. The McLaren team advertises the sponsor’s products and services in exchange for mutually-decided payment. The amount a Formula One sponsor pays a team depends on numerous factors and may range from as little as five hundred thousand dollars to as much as fifty million dollars.
However, there is no doubt that the teams that perform better, such as McLaren, manage to attract numerous sponsors as they get more airtime on TV which provides sponsors with better marketing opportunities.
At the end of the day, the McLaren Formula team earns most of its profit through Formula One Management payments, sponsorships and Brand Endorsements. Additionally, Formula One teams like Mclaren also earn through paying drivers, manufacturers and investments. It all comes down to the size of the team and how well they perform throughout the Formula One season.
Mclaren ranks amongst the top five most profitable Formula One teams. If McLaren maintains its momentum and continues to bag multiple awards every year, there is no doubt that McLaren will be able to dominate the Formula One industry and climb its way up to the top.
McLaren’s revenue and profit compared to other F1 teams
If we compare McLaren’s revenue and profit to other leading Formula One teams, there are certainly Formula One teams that manage to accumulate more revenue and profit. For instance, if we consider Formula One Management payouts, Ferrari earned the most through FOMP this year. The Formula One Management paid the Ferrari team a handsome amount of two hundred and five million.
Similarly, Formula One Management paid the Mercedes team a handsome amount of 177 million dollars. The McLaren Formula One team ranks third when we consider the amount the Formula One management paid. The Formula One management paid Mclaren a hefty amount of 152 million dollars in the year 2022.
Ferrari ranks among the ten most profitable teams in Formula One. Similarly, Mercedes currently dominates the Formula One industry and is considered the second most profitable team in Formula One. The Mercedes team alone managed to make a profit of seventy-six million dollars last year!
Similarly, Mclaren ranks amongst the top five most profitable Formula One teams. If McLaren maintains its momentum and continues to bag multiple awards every year, there is no doubt that McLaren will be able to dominate the Formula One industry and climb its way up to the top.
Frequently asked questions
Is owning an F1 team profitable?
Who owns McLaren’s F1 team?
Conclusion
Formula One teams earn through numerous passages. For instance, a Formula Team can earn via sponsorships, payouts from Formula One and more. Formula One teams manage to accumulate enough money to pay for their expenses through different means such as manufacturers, investments, pay drivers, etc.
However, this autosport is unpredictable. A team might make an enormous profit in one year and witness a rapid decline in the following years. For instance, in 2021, most leading Formula One teams were unable to upkeep their previous profit streak. Renowned teams like Redbull and Ferrari made profits of only ten and twenty million. Whereas a profit of twenty million may sound appealing, it is not when compared to the expenses a Formula One team has to carry.
