What Aston Martin's new deal says about F1's health

When manufacturers involved in Formula 1 hit trouble back at base, and costs have to be cut, it is all too easy to conclude that a grand prix programme is the easiest thing to axe.

After all, bankrolling an F1 team can be a hugely expensive exercise - costing tens of millions of pounds a year, with no guarantee of any silverware.

Over the years, many car makers have used outside financial pressures to justify pulling the plug on an F1 team (more recently, the global financial crash of 2008/2009 prompted BMW, Honda and Toyota to leave), but the reality is that it is often those who aren't winning that walk away.

But money pressures on manufacturers are perhaps higher now than they have been for a while, as they face increasingly tough carbon emissions targets. These are forcing manufacturers to pursue more expensive electrification options.

In many cases car sales are in decline, profit margins are lower, while R&D and investment funding has to go up. It's the perfect storm for the bean counters to cry enough and suggest drastic cost cutting is required.

It's a scenario that is all too close to home for manufacturers involved in F1. Their parent companies are going through internal reviews to try to plot a long-term path to a sustainable future - both in environmental and commercial terms.

But one fascinating aspect coming amid this backdrop - and you can add the uncertainty caused by Brexit to their troubles - is that F1's lure remains as strong as ever.

That much was made clear on Friday morning - when paperwork Aston Martin lodged with the London Stock Exchange in light of its major investment announcement made it clear just what a priority it is for the company to use opportunities F1 provides.

A consortium led by Racing Point team owner Lawrence Stroll bought a £182 million stake - and there is a planning rights issue that is aimed at raising a further £318m - and F1 was singled out as a central focus of its efforts.

This is a win-win for Aston Martin and Racing Point

The paperwork said that amid "lower sales, higher selling costs and lower margins versus expectations", it was clear that "an enhanced approach to F1 is considered important".

The plan is for Aston Martin to end its title sponsorship with Red Bull when their deal runs out at the conclusion of this year, and then the Racing Point team to be rebranded as the Aston Martin F1 squad from the start of 2021.

While that approach will not lead to the kind of direct technical works involvement that Ferrari, Mercedes and Renault have - the team will remain a Mercedes customer - there will be financial support from Aston Martin.

This will come in the form of a sponsorship deal that will initially run from 2021 to '25, but which can then be renewed if certain unspecified conditions are met. The deal it said to be "commensurate with the company's current annual F1 expenditure".

This is a win-win for Aston Martin and Racing Point.

From the team's perspective, the world is a very different place to how it was in the middle of 2018 when what was then Force India went into administration. Back then, in the middle of that year's summer break, its very existence was in doubt and just making the next race at Spa was not even guaranteed.

Now, it has an ambitious team owner in Stroll, who has brought in the backing and support of a manufacturer. Works links have an added kudos. And while the name change and new money will not bring instant success, as a platform for the long-term, the future is hugely encouraging.

From Aston's perspective, having its own F1 team will be a massive marketing boost in terms of globally raising awareness of its brand.

Aston is clear that mid-engined cars are a core element of its future, so being associated with F1 is almost essential. Its investment in electric vehicles has also been delayed to beyond 2025, so F1's hybrid platform remains the perfect fit as well.

In fact, while there has been a manufacturer rush to enter Formula E, there is a growing reality from some - especially those with performance products - regarding a need to stay on top of hybrid technology too. And to do that, being at the cutting edge of F1 is essential.

Earlier this week, McLaren posted some interesting quotes from its technical director James Key, who reflected on where he believes F1 will go over the next five years.

"What's important for F1, and I think this will inevitably happen, is that the sport continues to pursue the development of state-of-the-art powertrain technologies," he said. "We don't talk about it enough, but there are some extraordinary technologies that have been built into the engines during the current V6 turbo hybrid era.

"They are the most efficient in the world, delivering more power using less fuel, and hence CO2, than any other car. And equally impressive, is how rapidly these technologies have been developed to deliver engine efficiencies we could never have imagined just five or six years ago.

"Over the next five years it's very important to continue down the road of getting to an increasingly environmentally friendly set of conditions, and that touches all aspects of the sport, from the way the cars are propelled to the materials we use.

"It's a hugely important topic - one that Formula 1 and the FIA are embracing - and it's been underlined by the recent announcement of Formula 1's ambitious sustainability plan to have a net-zero carbon footprint by 2030."

Another factor at play here, which is important for manufacturers such as Aston and Mercedes, is the pure bottom line

F1's ability to act as the perfect shop window for such technology development is - for the manufacturers - as important as the publicity it provides. That's why Mercedes, which has been at the centre of recent rumours about its own F1 future, has been unwavering in its arguments about the benefits of staying put.

It is facing pressure on the financial front. Daimler has targeted €1billion of saving before the end of 2022, which will come through job cuts, with the company's vans and truck divisions facing €650million of that target.

Speaking last year, Mercedes CEO Ola Kallenius said that there would subsequently be a likely drop in earnings in the short-term.

"The expenditure needed to achieve the CO2 targets requires comprehensive measures to increase efficiency in all areas of our company," he said. "This also includes streaming our processes and structures. This will have a negative impact on our earnings for 2020 and '21. To remain successful in the future, we must therefore act now and significantly increase our financial strength."

This cost-cutting push has inevitably fuelled talk about whether or not Mercedes' F1 programme is under threat - especially with nothing guaranteed until its signs a new Concorde Agreement deal. Some have suggested that Mercedes has nothing left to prove in F1 because it has won so much and that it's only downhill from here. But that is not an argument that carries much weight for Kallenius.

"We have won the world championship six times in a row," he said. "That is unique and has more than paid off in terms of marketing. So, it has to be seen as a very worthwhile investment."

But there is another factor at play here too, which is important for manufacturers such as Aston and Mercedes. It's the pure bottom line.

The arrival of F1's cost cap from 2021 - albeit at quite a high level - means the days of escalating team budgets are pretty much over. And with that comes the opportunity for rebalancing the books. But if commercial rights income grows in the future, that opens the door to potential profit for a good team.

That would be a remarkable turnaround from the days when car makers were digging deep to bankroll operations. So, as Aston Martin and Mercedes show, F1 still has plenty left to keep manufacturers interested.