Mercedes, Formula One’s reigning team champion, is looking to treble annual revenues at its new technology arm, as part of a reorganisation aimed at complying with new rules that cap how much teams can spend on Grand Prix racing.
Applied Science, a division of Mercedes-Benz Grand Prix that also houses the F1 team, has been given the target of raising current revenues from £30m to £100m by 2025. The unit, launched in March 2019, aims to commercialise engineering expertise and intellectual property developed by the team.
Toto Wolff, team principal at the team which is majority-owned by German carmaker Daimler, insisted the mandate given to Applied Science to expand its revenues beyond the sport would not distract from his efforts to maintain Mercedes’ winning streak in F1.
“It is imperative for us to not be distracted from our core objective and that is winning races,” Mr Wolff told the Financial Times. “Every decision we are taking in Applied Science mustn’t dilute our ability to perform on track.”
Mercedes-Benz Grand Prix generated pre-tax profit of £17.1m on revenues of £363.6m in 2019, up from £15.5m and £338.4m the prior year, driven by higher sponsorship and marketing revenue as the F1 team secured its sixth consecutive constructors’ championship in a row. It currently leads the tables in this year’s competition, which has been reorganised in response to the coronavirus pandemic.
However Mercedes and other high-spending rivals led by arch-rival Ferrari face new rules aimed at curbing their financial advantage over other F1 teams. Teams will be restricted to spending $145m in 2021, a figure that will fall to $140m in 2022 and $135m from 2023 onwards.
Mr Wolff, who owns a minority stake in the team, added Applied Science’s new mandate was not an attempt to bend the new rules by concealing resources that could also be used by the F1 team, which he said cannot be a customer of the technology arm.
“Cross-pollination would be against the rules,” he said.
A redeployment of staff to Applied Science will save jobs as the F1 team adjusts to the budget cap, but Mr Wolff said that the expansion of the new technology division did not guarantee the business could “avoid hardship” as it adjusted to the new limits on spending.
Applied Science has already built on the F1 team’s sponsorship deal with Ineos, the chemicals group controlled by British billionaire Jim Ratcliffe, by forming a partnership with its cycling and sailing teams focused on aerodynamics and manufacturing of components.
During the coronavirus pandemic, Mercedes collaborated with University College London to help develop breathing aids for those hospitalised by Covid-19 and also provided shields for use by doctors in hospitals and other key workers.
The division also works with Racing Point, another F1 team, and has made work on the development of flying cars and drone technologies a focus for 2021.