Analysis: Formula One Taps into China

A few weeks ago, Eddie Jordan flew to Beijing. After barely half a day on the ground, talking business, he returned home.

Even if millionaire Formula One heads are used to jet-setting lifestyles, the fact that the Irishman was prepared to fly halfway around the world for such a fleeting visit suggested this was an important mission.

His team need backers and China, a vast and rapidly expanding market hailed as a 'New Klondike' before the country's inaugural Grand Prix in Shanghai last September, could provide the solution.

The world's most populous country is waking up to Formula One and the money-burning sport is eager to tap into it.

One of those Jordan spoke with, according to local newspapers, was Guo Jie, president of Beijing property developers Huabin Group.

"We have been toying with the idea (of buying a Formula One team) early this year but it wasn't until the huge success of the Chinese Grand Prix that we seriously pursued the idea," the Shanghai Daily quoted Guo's spokesman as saying.

"Looking at the huge commercial interest generated in Shanghai, we realised that a Formula One team backed by China could also enjoy business success."

Jordan already had Chinese backing for the Shanghai race, with B&Q China joined by property development company Shoulu-Huayuan's Beijing Chateau luxury apartment building, and there have been persistent rumours of substantial Chinese sponsorship to come.

Christian Horner, the head of the Arden Formula 3000 team, has been talking to Jordan and there is considerable speculation about a possible takeover involving him and a Chinese consortium.

Sold Out

There has also been talk that Sinopec, the state petrochemical giant that sponsored the Chinese Grand Prix, wants to back a team. BAR are seen as likely candidates.

While some Chinese companies now seem ready to embrace the sport after initial wariness, teams and foreign multi-nationals are clear about Formula One's usefulness as a platform to promote brand awareness.

"Almost every one of our sponsors without exception is marketing heavily in China," said Jim Wright, marketing director at BMW-powered Williams.

"BMW is selling more 7 series in China than they are anywhere else. It's a huge market for (US-based computer giant) HP, Budweiser have enormous interest in China through joint ventures and acquisitions of breweries down there and the Bud brand is hugely successful in China.

"From a corporate hospitality point of view, [the race] was totally sold out and I think there were some people waiting to buy into it and they were disappointed," added Wright.

The carmakers who dominate Formula One are equally excited about the opportunities in a country where the main mode of transport involves two wheels rather than four.

"In my view, this is a very important race, probably the most important race in the history of motorsport," said Mercedes motorsport boss Norbert Haug.

Wright was impressed by how aware the Chinese were about Formula One, despite having no motorsport tradition and no leading drivers on the world stage.

"There was no educational process to go through with these guys. They knew their Formula One inside out," he said.

Driving Chaos

No expense was spared to build the best and most striking of circuits, costing some $325 million and seating 200,000.

"A Chinese government representative approached [Formula One supremo Bernie] Ecclestone and asked how much it would cost," a recent edition of Business F1 magazine quoted a senior Shanghai-based executive as saying. "When Ecclestone quoted his opening offer, the Chinese government accepted."

The magazine said the deal to host the race amounted to $30 million a year until 2010, three times the going rate for European races, with local television rights for the same period costing another $20 million a year.

"There are 1.3 billion people in China and we currently have a television viewership in Shanghai and Beijing alone which exceeds the total viewership in the whole of Europe," Ecclestone himself told The Guardian newspaper.

"I've been 10 years working behind the scenes to get the right place and Shanghai is certainly the right place in my view. Just like when we took Formula One behind the Iron Curtain for the first time to Hungary in 1986."

But while teams had more corporate guests than at any race of the year, volume is not everything. Monaco is unlikely to be overtaken in a hurry as the round that attracts the most high-level executives.

"With regards to China, there will always be greater volume," said Wright. "Whether it attracts the CEO-level type of guest, I don't know yet.

"Certainly we had evidence that there were a number in the first year...but whether that is sustainable or not I don't know. Even if it's not, there will be an enormous appetite from corporate China for Formula One."

Not everything was ideal, however.

Shanghai was also a race where the world's fastest drivers, Michael Schumacher included, had to be chauffeured to work due to laws preventing them and anyone else without a local driving licence from getting behind the wheel on public roads.

It was a Grand Prix where team chiefs, used to quick helicopter jaunts above the traffic jams in Europe, joined everyone else in battling through the Shanghai gridlock and it proved a painful experience for Wright.

He spent the morning of the race in a Shanghai hospital after the team van was rammed by a car at high speed on the way to the circuit.

"There is no doubt that the standard of driving on the roads (there) is utterly dangerous and totally unacceptable," Wright said.