World’s best Formula One team is looking beyond victory laps

Mercedes-Benz has won the last seven Formula One championships, but parent Daimler AG is reducing its ownership in the team. While F1 remains valuable from an image perspective, Daimler can now get more bang for its marketing bucks, all while the racing unit also pushes to boost its own revenue outside international race tracks.

Mercedes-Benz Grand Prix Ltd. plans to sell more engineering services to external clients. By tapping its expertise in optimizing aerodynamics and engine efficiency as well as crunching complex data, the Brackley, England-based business aims to triple revenue at its applied-science unit to 100 million pounds ($135 million) by 2025. The whole venture is pushing to be profitable in two years, Chief Executive Officer Toto Wolff said.

“In Formula One it’s all about speed of delivery, and our speed of delivery of technical solutions that are both competitive as well as safe is something that can be applied across a wide range of areas," Wolff said in an interview.

Mercedes is one of the world’s most successful racing organizations. Its star driver Lewis Hamilton has won six F1 championships since 2014, with the seventh going to his former teammate, Nico Rosberg. The dominance faces a fresh test next year when cost caps take effect to reignite competition and make Formula One racing more sustainable.

F1 Finances

Mercedes-Benz doesn’t disclose all spending on F1 operations. But Daimler estimates the business generated more than $1.5 billion in equivalent advertising value last year, based on a total television audience of 1.9 billion people, and CEO Ola Kallenius sees it as valuable test lab for hybrid-engine technology.

Daimler announced this month it will halve its stake in the team to 30%, with Ineos Group joining as shareholder. The chemical conglomerate founded by U.K. billionaire Jim Ratcliffe already was one of the F1 team’s main sponsors and has collaborated with the business on sailing and cycling ventures.

With Ineos, Daimler is getting a cash-rich partner as it’s cutting costs across the group to finance an expensive shift toward electric vehicles in the midst of a pandemic. Other automakers are paring back their motorsports activities while trying to adapt to the world increasingly shunning the internal combustion engine.

Honda Motor Co. said in October it will leave F1 at the end of the 2021 season, while BMW AG and Volkswagen AG’s Audi have announced they’ll quit Formula E electric-motor racing. The VW brand is terminating all motorsports activities and reassigning employees to work on building the industry’s biggest fleet of battery-powered vehicles.

Powerful Supercar

In addition to making external sales efforts, the Mercedes F1 team has deepened collaboration with Mercedes’s AMG performance-car division to bolster offerings of fully or partly electric sports cars. Well-heeled costumers will be able to experience results next year, when the GT four-door hybrid automobile and the Project One supercar hit the road.

The three years that have transpired since Mercedes showed the latter car -- a two-seater boasting more than 1,000 horsepower -- suggest there are reasons no other automaker has tried to plug a F1 drivetrain into a vehicle for public roads. Porsche AG and Toyota Motor Corp. have used racing to test technology for road vehicles, but the transfer of know-how mainly focused on areas such as downsized turbo engines or recuperating electric power in hybrid systems.

Adapting sophisticated F1 components like the exhaust-gas turbocharger and tweaking noise vibration to levels that don’t perforate eardrums is expensive. Still, it’s worth the effort, said Jochen Hermann, AMG’s technology chief.

“We’re well connected now and learn from each other," Hermann said in a phone interview. “The electrification of sports cars is an opportunity we want to seize."