Porsche And Audi To Join F1 As A Sign They Can Make More Money Than Invest

For quite some time, Volkswagen-owned Porsche and Audi have been rumored to be joining Formula 1. Now that has been made official and shows that the sizable investment will be offset by financial gain.

VW’s CEO Herbert Diess said on Monday that the two premium brands would be joining the top global racing league in 2026 when technical regulations around the that boost energy savings come into play. As Diess said, “You can't get into Formula 1 unless a technology window opens, you need a rule change to get in there.”

The moves by Volkswagen will likely come in two forms: one will be for Porsche to partner with Oracle Red Bull Racing to replace Honda as the engine supplier. While the Japanese company remains in support for the 2022 season, the race team had to fire up its own power unit division called Red Bull Powertrains.

The play with Audi may come in the form of purchasing McLaren, although the supercar maker has found better financial footing through a Saudi equity investment of £50 million ($758 million U.S.). Audi is reportedly ready to offer around €500 million ($556.3 million U.S.) for McLaren.

While it is being reported that there were “divisions” at an event regarding entry into F1 in Wolfsburg where Volkswagen is located, in the end Diess said "You just run out of arguments," for not joining.

A large part of running out of arguments centers on the financial return on the F1 investment.

Diess said that return through sponsorships, brand exposure, and more that now come with Formula 1 is greater than the investment into the racing league. Liberty Media-owned F1 continues to grow in popularity through the docuseries Drive To Survive, and that factored into the decision.

"Formula 1 is developing extremely positively worldwide. The marketing that is happening there, plus Netflix NFLX , has led to Formula 1's following growing significantly in the U.S. as well," said Diess.

Formula 1’s economic model shifted beginning in 2021 with a cap system designed to make the field more competitive. For 2021, the cap was $145 million. For 2022 it is $140 million and $135 million for 2023 with inflation increases allowed on top for 2024 and beyond.

Taking the cost containment and increased popularity of the global racing league together makes the platform an alluring combination for the likes of Volkswagen’s Porsche and Audi brands.