How Formula 1 Teams Make Money: Inside the High-Stakes Business Behind the Sport
Formula 1 is often described as the pinnacle of motorsport engineering—a high-speed ballet of carbon fiber, physics, and elite driving talent. But beyond the roar of turbocharged engines and the glamour of Monte Carlo yacht parties lies one of the most complex and high-stakes business models in professional sports.
With annual budgets ranging from $150 million to over $700 million, Formula 1 teams operate more like global corporations than traditional sports franchises. So how exactly do these teams—some with thousands of employees and facilities across continents—generate revenue and, in some cases, turn a profit?
Here’s a deep, factual look at how Formula 1 teams make their money in today’s competitive landscape.
1. F1 Prize Money: The Core of Team Revenue
At the heart of a team’s financial engine is the Formula One Group’s prize money pool, which exceeded $1.2 billion in 2023, according to Liberty Media’s investor filings.
The pool is distributed among the ten teams based on a structured formula that includes:
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Column 1 Payments: A base payment awarded equally to every team that finishes in the top 10 over two consecutive seasons.
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Column 2 Payments: A merit-based payout determined by the team’s position in the Constructors’ Championship.
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Bonus Payments: Special payments to legacy teams such as Ferrari, which receives a “Historical Payment” for its longstanding participation.
Top-performing teams like Red Bull, Mercedes, and Ferrari each walk away with over $100 million annually in prize money alone, while smaller teams earn proportionately less depending on their final standings.
2. Sponsorships and Brand Partnerships
Sponsorship is the lifeblood of F1 team finances, often accounting for 40% to 60% of annual income. Companies spend millions for logo placement on race cars, driver suits, and team apparel, with global exposure from more than 1.5 billion cumulative viewers per season.
Big-name sponsors include:
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Oracle (Red Bull Racing) – reportedly a $300 million, five-year deal
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Petronas (Mercedes) – estimated at $75 million per year
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Shell (Ferrari), Aramco, Castore, and countless tech, finance, and lifestyle brands
These deals go far beyond visibility—they often include technology integration (like software or fuel development), hospitality experiences, and co-branded marketing campaigns.
3. Manufacturer Support and Technical Alliances
For works teams like Mercedes-AMG Petronas, Ferrari, and Alpine (Renault), parent manufacturers often underwrite significant portions of team budgets. These teams act as halo marketing arms for car brands, pushing innovation that trickles down into road car development.
Customer teams such as Aston Martin or Haas pay fees to use engines and technical components from larger outfits like Mercedes or Ferrari, but the revenue flow works both ways—engine suppliers receive income from customer contracts, technical services, and even software licensing.
4. Merchandise and Licensing Revenue
With drivers like Lewis Hamilton and Max Verstappen achieving global celebrity status, F1 teams have transformed into lifestyle brands. Teams sell everything from diecast models and replica race suits to high-end clothing lines and digital collectibles.
Revenue from merchandise and official licensing is especially significant for brands with massive fan bases, and is boosted further by online storefronts, pop-up shops at Grand Prix events, and strategic fashion partnerships.
5. Hospitality and VIP Experiences
Formula 1 offers arguably the most exclusive hospitality program in global sports. Through packages like the Paddock Club, teams host sponsors, celebrities, and VIP guests trackside—complete with five-star dining, pit lane access, and driver meet-and-greets.
Teams often sell premium experiences directly to partners or use them as high-value relationship-building tools with stakeholders and investors. For major race weekends, these packages can fetch $8,000 to $20,000 per person.
6. Equity Value and Team Sales
As the global popularity of Formula 1 surges—thanks in part to Netflix’s Drive to Survive—the equity value of teams has exploded. When Lawrence Stroll bought a majority stake in Racing Point (now Aston Martin) in 2018, the team was valued at under $100 million. In 2023, Forbes valued Aston Martin F1 at over $1.3 billion.
Teams like McLaren and Williams have attracted outside investment from private equity firms and sovereign wealth funds, turning F1 teams into appreciating assets rather than just annual cost centers.
7. Technology Spin-Offs and R&D Commercialization
Formula 1 teams are engineering powerhouses, and many have commercial arms that sell their R&D capabilities beyond racing. McLaren Applied Technologies, for example, develops systems for public transportation, cycling, and even medical devices. Similarly, Mercedes has licensed its high-performance simulation software to aviation and defense contractors.
These spin-offs provide a revenue stream detached from the team’s race performance and contribute to long-term financial sustainability.
Final Analysis: A Business of Speed and Scale
Formula 1 teams operate in one of the most extreme environments in professional sport—where victory is measured in milliseconds and budgets can dwarf those of NFL franchises. But behind the pageantry lies a ruthlessly efficient business model that blends sports, entertainment, tech innovation, and global marketing.
The new cost cap system introduced by the FIA, which limits teams to $135 million in core spending, has only increased profitability by leveling the playing field and making investment more predictable. As a result, F1 teams are now not just fast—they’re financially leaner, more valuable, and better-run businesses than ever before.
