Pure Greed Is Just One Reason F1 Doesn't Want Andretti

Formula 1 has wanted the American market, it has wanted more American races, and the sport itself has been increasingly Americanized in recent years.

Now, a big-time American racing team, backed by an American car giant, wants to join the party, but Formula 1 isn’t keen on handing out any invitations.

What Is the Situation?

First, some brief background, for those who have not been following every detail.

Michael Andretti, who raced a partial season for McLaren in 1993, has been striving to enter Formula 1 in recent years. He came close to a takeover of Sauber—a team currently competing under the Alfa Romeo brand—in late 2021, but that deal collapsed over control issues once financial terms had been agreed.

Andretti announced plans in February 2022 to form its own team and behind-the-scenes was lobbying existing teams while putting the required infrastructure in place.

The FIA opened a process for prospective new teams in January 2023 and Andretti swiftly publicly formalized its plans, while revealing that it had gotten General Motors on board, through its Cadillac brand, as a partner, though not as a power unit manufacturer.

At the start of October, the FIA announced that Andretti had met the criteria it set for the applicants and had passed on the bid to Formula 1. Andretti was the only one of four applicants to reach the FIA’s threshold.

Formula 1, led by CEO Stefano Domenicali, will now discuss commercial matters with Andretti and the final process is expected to run into early 2024.

How Has Andretti’s FIA Approval Been Received?

Formula 1 teams, with the possible exception being Andretti’s ally Zak Brown’s McLaren team and expected power unit partner Alpine, are not in favor of the application being approved by Formula 1.

It is important to distinguish that this is not an attack on Andretti, or an anti-Andretti agenda, but on the presence of an 11th team, and the reasons are purely financial.

The existing teams are protecting their interests and assets, as the introduction of another team will dilute the prize fund and lessen the value of their own teams.

The revenue and prize money, hugely important for Formula 1 teams, would have to be split 11 rather than 10 ways should a new team come into the series. Because of this and to soften that hit to the existing teams, Formula 1 has an anti-dilution fee—in effect a new-team entry fee—set at $200 million under the current Concorde Agreement. That money would be shared between the existing 10 teams.

Teams, however, argue that Formula 1’s growth since that Concorde Agreement means a one-off lump sum of $200 million would not cover their losses from splitting the pie 11 ways.

There have been attempts to significantly raise this fee for the next Concorde Agreement, set to be introduced in 2026. Andretti, its detractors have said, must pay a high rate while also presenting arguments that it will be an asset that can help increase the value of the F1 pie by a minimum 10% to make up for potential lost revenue to the other teams.

“All of a sudden if you lose 10%, you have to find it somewhere else,” said Haas F1 team principal Guenther Steiner.

There is a secondary factor at play, too.

The value of Formula 1 teams has risen in recent years, boosted by its growth in popularity, the presence of a cost cap, and the shift towards a franchise model.

There are teams who would sell at the right price—even if they say they wouldn’t—and they don’t want any value being knocked off their asset by the presence of an 11th entity. It is understood one owner has rejected a 10-figure bid for their team.

Very few in senior positions are keen to see someone pay $200 million to enter and immediately have an entity worth at least three times that.

Do the Teams Have a Point?

Is it pure greed, or is the financial stance justified? As ever, the truth rests somewhere in the middle.

Of course, each team has a vested interest, protecting the value of a commodity, and ensuring there is no business threat. And several team bosses are correct in pointing to Formula 1’s recent history.

“We have to keep in mind that three or four years ago we had almost half of the grid quite close to the bankruptcy and we have to avoid to be arrogant,” said Ferrari boss Fred Vasseur.

The Manor team collapsed pre-2017, having slipped to 11th place in the 2016 standings which was then ruinous under Formula 1’s old financial model. Then, Force India entered administration mid-2018 and was rescued by Lawrence Stroll. The team now competes as Aston Martin.