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Toto Wolff discusses the future of Formula 1, cost caps and more

With the retirement of Frank Williams this year, Toto Wolff is now the most successful active team principal in Formula 1. His range of motorsport responsibilities for Mercedes also includes Formula E, where rivals BMW and Audi made shock withdrawal announcements recently. So how does the seven-time world champion team boss see the future of both series and what is his view on what the motorsport of tomorrow will look like?

Toto Wolff discusses the future of Formula 1, cost caps and more

For this latest #ThinkingForward, we spoke to Toto about the future role of manufacturers in the sport, the eventual showdown between hybrid and electric racing for dominance and whether F1 should have a drivers’ salary cap.

 

We start with Formula 1 and with all that's happened this year, the Concorde Agreement, budget cap, successful racing restart programme after the lockdown, does Wolff think that F1 is in better shape now due to lessons learned from this crisis? And will that help shape its future?

TW: Well, obviously, this was a difficult year from a sport point of view. But more importantly, from a personal standpoint, I think none of us is going to go out of 2020 on New Year's Eve, and say, ‘that was all great’. But I think, as with the team's mentality, you learn the most out of the painful situations. And in that respect, I would agree with you the sport will come out stronger from this. We have been able to put the calendar together and this is thanks to the FIA, FOM and the teams collaborating in a positive way. And we've reduced the costs all together. We are one of the very few sports in the world that has been able to do so. And I believe that this is going to strengthen us going forward.

Toto Wolff, Executive Director (Business), Mercedes AMG, collects the Constructors trophy for Mercedes

Toto Wolff, Executive Director (Business), Mercedes AMG, collects the Constructors trophy for Mercedes

Photo by: Steven Tee / Motorsport Images

From a strategic point of view, a successful future for Formula 1 is obviously where the teams, FIA and Formula 1 are all aligned on what they want the sport to be. And the fans find that product and the personalities engaging. Five years ago, I think neither of us would really have said that we were on that path. But is that now the path that we're on?

TW: I think we are on a very good trajectory, against all odds, we're still growing, in regular TV, free to view and Pay. And we've been very successful with the Netflix co-operation, where we have tapped new audiences. Social media is growing very strong; the strongest growing sport globally, obviously, from lower levels that some of our American counterparts. The strongest growing audience is the 15-to-36-year old. And we can see that and feel that every single day with our young followership growing.

I would say in that respect, we are in a much better position than five years ago. The decision making is not short-termist anymore and erratic like we've had that in the past. But we're making decisions on the mid to long term timescale, which avoids the polemic around "who has an advantage tomorrow or today?" And I think, overall, a much better place.

Toto Wolff, Executive Director (Business), Mercedes AMG

Toto Wolff, Executive Director (Business), Mercedes AMG

Photo by: Steve Etherington / Motorsport Images

One of the big things that is going to change the face of Formula 1 is the cost cap, we've seen some short-term impacts already; the alliance between Ferrari and Haas is changing, for example with chassis man Simone Resta being moved to Haas and staff moved across and alliances with drivers, like Mick Schumacher

TW: Simone Resta has been deployed to partner teams in the past, like Sauber Alfa Romeo. And he's probably one of the very strong engineers in the business. And in that respect, that is clearly a huge gain for Haas, as it was with Sauber in the past. So overall, the relationships that the teams have with each other - be it partnerships, like the one you mentioned, or co-operations, like we have with McLaren, where we are power unit supplier - I think this is important for the economies of scale. I think these teams benefit from the huge R&D costs that have been invested over the years from the manufacturers.

On the other side, we are able to refinance some of our operating costs. It's a win-win situation and I think this is the way forward. Obviously, we need to consider OEMs or teams that haven't got these kind of relationships today and not end up in a situation where there's a huge discrepancy. So, we need to align on the long term views today, probably 80% of the teams have such partnerships. I would hope that in the future everybody has different benefits from the reasons I stated before.

Nyck De Vries, Mercedes Benz EQ

Nyck De Vries, Mercedes Benz EQ

Photo by: Alastair Staley / Motorsport Images

Talking about the role of manufacturers we’ve seen some movement in major championships this year: Honda decided F1 one no longer fits the bill. In Formula E we’ve seen BMW and Audi withdraw. Do you see this as part of the natural ebb and flow of manufacturers in racing championships? Or is this the start of a bigger re-evaluation of the value of motor racing for the automotive sector?

TW: I think there's a few reasons behind coming and going. And the most important one is the return on investment. If you're not able to generate returns, be it on the branding or marketing side, or on technology transfer, or simply by financial terms, sooner or later people on the board are going to say, "Well, why are we doing this?" And this is absolutely clear. You need to get something out of it.  If your returns are not good enough for the industry standard, or compared to the other activities you deployed, one day, you're going to pull the plug on these activities. And on top of that, if it's not successful, and not even the branding side benefits from it, if I were on the board, I would also consider doing that.

But the difference between how we (Mercedes) are looking at things in motor racing is that we are considering the sport as our DNA; we are building road cars, and we are building racing cars, and the first car from Mercedes was actually a racing car. We are not changing our mind every year based on success, or failure. We've gone through various periods of pain as Mercedes in Formula 1, as an engine supplier, but also as a team. When you look back at the years from 2010 until 2013, three full seasons, we weren't competitive, and only in '13, the odds changed a little bit before being successful in 2014.

There's one thing all the capital and all the resource can't buy in Formula 1: that is time. You need to have the patience, you need to have the long term view to reap the benefit in the future. At board level people come and go or people swing with what the markets want - the electrical story - corporates can swing that way. And I totally accept that; if I was in their situation, I would consider that. But Daimler has never been that way. And this is why we are in F1 today and obviously with the success that that we've had. We could have been out of the sport in 2013, if we wouldn't have been able to cope with the painful years.

Stoffel Vandoorne, Mercedes Benz EQ, EQ Silver Arrow 02

Stoffel Vandoorne, Mercedes Benz EQ, EQ Silver Arrow 02

Photo by: Sam Bloxham / Motorsport Images

Looking at Formula E specifically plenty of manufacturers took part last season but the current benchmark electric vehicle company, Tesla, doesn't compete in the sport. Does that affect the thinking on the need to be part of an electric race series?

TW: Why are OEMs or auto companies competing in motor racing or investing in marketing platforms or branding? Because they simply want to add brand equity and brand equity value to their companies. They want to be perceived in a certain way. Buying a car is an emotional task; often it's explained by a rational thinking "I'm buying this car because it's carbon free". But actually I'm buying this car because I want to let the world know how I see myself rather than who I really am. So it's all a marketing exercise. And Tesla does that. Elon Musk is the chief marketeer and chief cheerleader of his company. He stands for edge, for innovation, for entrepreneurism and he's a rock star, you can say. And they have been a pioneer in electric mobility. They don't need marketing platforms because Tesla and their owner and CEO stand for their marketing.

Companies that have a much longer history in the automobile sector, they have always played on marketing platforms to load the emotional factor to their branding. And in that respect, these platforms have relevance. Mercedes has definitely benefited in the last few years from our success in Formula 1, we are sporty, we have a sporty image today, we are seen as dynamic. It's all around teamwork, and the mindset behind it and on a global platform. You add to this the most important factor, good cars, then all works intertwined. And the brand benefits, marketing benefits and car sales and their margins will benefit from these activities. So it all comes down to your decision. What are the marketing platforms that I would like to utilise? And how can I load the emotional factor in a decision to buy a car?

Toto Wolff, Mercedes AMG F1 Director of Motorsport

Toto Wolff, Mercedes AMG F1 Director of Motorsport

Photo by: Mercedes AMG

Formula 1's strategy, meanwhile, is to work on sustainable fuels and double down on hybrid internal combustion engine cars that that are going to remain on the road long after the new vehicle sales have been banned in many developed countries by their governments. How does that look for manufacturers? And will you still be producing any internal combustion engine vehicles 10, 15 plus years from now?

TW: I think what we've seen in the past few years is that you cannot predict where the industry is going to stand in 2030. The data today, and even the most dynamic ones show that rather than having 30% electric vehicles by 2025, we're going to have 30% of electric vehicles by 2030. We're seeing a big push in biofuels and synthetic fuels, which would reduce the emissions on petrol cars tremendously if the energy comes from sustainable sources. So I believe you can't really judge today where the road car industry is going to stand in 2030. And there are premium auto manufacturers such as Daimler who are still investing into internal combustion engines, because in combination with these sustainable fuels, it is a much better carbon footprint than some of the electric vehicles today, where the energy resource is provided by coal or gas.

In that respect, I believe that in Formula 1, it is about technology transfer, we should be leading the pack with sustainable fuels and biofuels in collaboration with our fuel suppliers, in collaboration with our mothership companies, and at the same time being open to technology transfer in the electrical field, but we need to have a holistic view. Formula 1 is an entertainment platform that is based on cutting edge technology. We need to look at energy density for applications in the road car field. And we need to look at power density for the entertainment factor Formula 1. And there's not an easy answer to that question.

Valtteri Bottas, Mercedes-AMG F1, 2nd position, and Lewis Hamilton, Mercedes-AMG F1, 3rd position, congratulate each other on the grid

Valtteri Bottas, Mercedes-AMG F1, 2nd position, and Lewis Hamilton, Mercedes-AMG F1, 3rd position, congratulate each other on the grid

Photo by: Steve Etherington / Motorsport Images

Toto according to a recent audience survey, we ran on Motorsport Network fans were very supportive of a budget cap in Formula 1 for teams (75%) but were a bit divided in terms of driver salary cap, that's currently being evaluated (40% in favour, 36% against) Do you think it's something that can really work and is it right for Formula 1?

That, of course, is a very polarising topic, a controversial topic. I think we need to do everything to make Formula 1 sustainable, and we need to stop the teams with more resource competing in different fields than the ones that are currently cost capped. So if you say there is a cost cap on the chassis, I think we need to have a cost cap or freeze on the power unit side. And if that is kept, the money is going to be deployed in other areas, people are going to compete in the market for managers, and their salaries are going to reach astronomical heights for the best people. And in the same way on the drivers' side.

I believe that Formula 1 drivers are the best in the world, they should be paid like most of the sports superstars in the world, but we should look at the American sports leagues. And you can say that the NFL and the NBA have made their leagues and their teams sustainable by reaching breakeven or profitability targets. And we as Formula 1 are only going to be sustainable and generate an interest for team owners coming in for these franchises to be profitable if we achieve a general consensus on costs, and in that relationship, we need to look at driver cost in the same way it was dealt with in the US.

Toto Wolff, Executive Director (Business), Mercedes AMG, and the Mercedes team celebrate another succesful World Championship campaign

Toto Wolff, Executive Director (Business), Mercedes AMG, and the Mercedes team celebrate another succesful World Championship campaign

Photo by: Steve Etherington / Motorsport Images

Finally, Toto, you’ve achieved so much as part of the Mercedes team over the last seven years. Where do you see yourself in seven years’ time?

TW: Again, also there, it's difficult to make predictions. But I love the sport. I love auto racing, I love the platform. And I see great potential for Formula 1 going forward. We have an additional leadership component with Stefano Domenicali coming in, Chase still being there. And in that respect, I believe that all of us together, all stakeholders can really steer the sport to a bright future. We are seeing the success that we've had in the last one or two years with the various steps that we've made. And I believe that in seven years, the sport could be in a fantastic position. And that means that the teams are going to be sustainable, financially, technology wise, and going to provide great entertainment.

So, this is the place I want to stay. I'm proud to be a co-owner with Mercedes of this team. But my role in the future may change. Being team principal now in my eighth year and I want to do this for a while, but maybe I will transition into some kind of other executive function in the next few years. I haven't made the decision yet. It is about identifying the organisational structure of the future, developing the individuals and only then I will be able to change my role.

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