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Is F1 Looking For Greener Credentials?

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A bizarre dispute has revved up in Formula One after the company’s motor sport boss suggested that its current product, which has been around for 68 years, may only have a decade of gas left in the tank.

The ‘formula’ in ‘Formula One’ refers to technical regulations issued by auto racing’s governing body the Fédération Internationale de l’Automobile (FIA). Cars complying with the regulations are eligible to compete in the F1 world championship and the commercial rights to the series are owned by Liberty Media which is listed on the Nasdaq with the ticker FWONK.

The first race of the championship took place in 1950 and since then F1’s cars have been powered by internal combustion engines – gas guzzlers to you and me – with the current configuration being a 1.6-liter turbo hybrid. It could soon get the red light.

In a recent interview with the official F1 Fan Voice portal, motor sport director Ross Brawn said “if in five years’ time or ten years’ time there is a need, desire or wish to have a different type of power unit in Formula One then we will do it. There is nothing to stop us having electric Formula One cars in the future.”

He added “I don’t see Formula One being locked into internal combustion engines forever, but who knows where we are in ten years. Ten years ago I don’t think many people would be able to predict where the world is now and therefore I don’t know where we will be in ten years, but Formula One will move in the right direction.” It made headlines.

“Brawn: F1 could go all-electric in ten years” said sports broadcaster ESPN whilst Eurosport reported “F1 could go fully electric by 2028, says Brawn”. It is a controversial subject for several reasons.

Firstly, electric-powered race cars are slower than ones with combustion engines so many fans see them as being somewhat of a gimmick on the track. Crucially, there is already an electric-powered race series called Formula E and the commercial rights to it are owned by a company which has little connection to F1. As Britain’s Daily Telegraph newspaper revealed yesterday, its largest shareholder is Nasdaq-listed Liberty Global though it isn’t controlled by Liberty Media. In fact, the main connection they have is that billionaire John Malone is chairman of both of them.

Both F1 and Formula E use single-seater, open wheel, open cockpit cars and are the leaders in the fields of racing with combustion engines and electric motors respectively. Accordingly, if F1 switched from the former to the latter it would become tantamount to Formula E.

Although Formula E’s UK operating company burned up combined net losses of $144 million over the four years to 31 July 2017, and its popularity trails in F1’s dust, the two are still rivals. As the Telegraph reported, German insurer Allianz switched from being an F1 sponsor to partnering with Formula E early last year. Likewise, Formula E lured fashion label Hugo Boss away from F1’s reigning champions Mercedes at the end of last year and it has also attracted Audi which F1 has been courting for decades.

Brawn’s comments suggested that the clock is ticking on F1 as we know it because it has always been a combustion engine formula. It would be new start for F1 and would give Liberty only a decade to maximise the potential from the current format. This could concern FWONK stockholders, especially as Liberty has publicly said it is taking a long term view which has seen it boost costs leading to F1’s operating loss accelerating to $37 million last year.

Some may see it as being unthinkable that Liberty could cast aside a format which has so much goodwill vested in it but it wouldn’t be the first time. F1’s previous logo had been used for 23 years and the trademark registrations for it were some of the key Intellectual Property assets owned by the company that Liberty paid $4.6 billion to buy. Likewise, soon after it got the keys to F1 Liberty re-branded F1’s junior series GP2 as Formula 2 despite also owning registrations to the previous name which had been used for 13 years.

If anyone knows what direction F1’s engines are going in it is Brawn as he is the technical guru of the series. So saying on F1’s official channel that the series could become all-electric is akin to the chief executive of Coca-Cola claiming that its flagship drink could taste like Red Bull in future. If that were to happen Red Bull’s boss could rightly take issue with the claim so it’s no surprise that Brawn’s comments sent sparks flying.

“Ross said that Formula 1 could go electric in 10 years – and basically, they can’t,” said Formula E’s CEO Alejandro Agag just one day after Brawn’s interview was published. Both F1 and Formula E are governed by auto racing’s regulator the Fédération Internationale de l’Automobile (FIA) which ultimately owns their commercial rights. It has granted them to Liberty’s subsidiary until 2110 and although Formula E’s terms are not as long, they are exclusive.

“Formula E has an exclusive licence with the FIA for 25 seasons, and we’ve only done four,” said Agag. “So the earliest Formula 1 could go electric is 2039, if we don’t renew our agreement with the FIA then, but I don’t see any reason why we shouldn’t renew for longer. We have exclusivity until at least 2039 – so no electric F1 until then at least.”

Agag added that Brawn “got the maths wrong” as he suggested “there may be the possibility of Formula One going full electric, but clearly that’s not possible without talking to us because we have exclusivity with the FIA.”

If Agag had not set the record straight so fast there could have been a risk of potential sponsors turning away from Formula E and waiting instead to see whether electric F1 would make a better partner.

Agag’s view has since been corroborated by the FIA’s president Jean Todt who recently said to sports magazine Autosport “it is true that we have an exclusive agreement on single-seaters for a certain amount of years with the promoter in FE, but it would be a nonsense to say that in the future Formula 1 is going to be electric. It is not going to happen. Simply you could not do it. We are talking about two completely different categories.”

Todt didn’t stop there. In addition to saying that Brawn’s comments were “nonsense” he said “it is completely misleading to compare FE and F1. F1 is a well-established category and I keep saying that for me, FE is a baby of the FIA so there is still a lot to learn.”

It raises questions about what could have driven Brawn’s comments. Why would he link F1 with a move to electric motors when it isn’t even possible according to the powers that be? This clearly wasn’t inadvertent as it was said on F1’s official channel so could have been removed if necessary and there was no external need for the comments to be made in the first place.

It is very surprising that Brawn didn’t use the opportunity to extol the virtues of F1’s hybrid engines, especially as they are widely seen as being the most viable environmental personal transportation solution in the medium to long term.

The timing of Brawn’s comments was perhaps even more surprising as F1’s manufacturers are currently in talks with Liberty about the specification of the combustion engine which will be used from 2021 onwards. It will cost them hundreds of millions of Dollars to develop so suddenly talking about the cars being electric-powered in future is confusing at the very least.

The impression given by Brawn specifically connecting F1 with electric engines in this unprompted and official way is that the series is so conscious of the environment that it could even go all-electric.

That is the way it comes across but Brawn said his suggestion about changing the engine is actually driven by the fans. “I think Formula One will evolve in the direction that has the right balance of sport, relevance and engagement with the fans,” he said. “Formula One is the pinnacle of motorsport, the speeds we do, the calibre of drivers we have and the teams we have, and if that moves in five or ten years’ time to a different power source then we will do it if that is most appealing and achieves what we want to achieve.”

His comments followed multiple reports about accelerating sales of Electric Vehicles. In May a report by the International Energy Agency predicted that the global fleet of EVs is likely to more than triple to 13 million by the end of the decade from 3.7 million last year. The Paris-based institution, which was set up to advise industrial nations on energy policy, said that sales of EVs may soar 24% each year on average through to 2030.

The following month another report, this time from Bloomberg New Energy Finance, forecast that by 2050 EVs will account for around 9% of total global electricity demand, up from about 0.2% now. In some places it will be even higher, like Germany, where EVs are expected to account for as much as 24% of demand. With that kind of an outlook you can understand why anyone would want to tag along for the ride.

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