Why FE must learn from F1's boom and bust

That Porsche dumped the World Endurance Championship and Le Mans in favour of Formula E is, frankly, no surprise, for after winning the sportscar championship in 2015 and '16 and being on track to repeat it this season - plus taking its tally to 19 Le Mans 24 Hours victories, the last three on the trot - what else is in store for the prestige German sporting marque other than being squarely beaten by what is considered a humdrum consumer brand in the shape of Toyota?

The fact that Porsche has chosen to compete in FE does not, however, mean that Zuffenhausen is lost to Formula 1, for close Stuttgart neighbour Mercedes will soon be participating in both the fossil-fuel and electric championships - while Renault, confirmed as 2017 FE teams' champion on Sunday, from last year added F1 to its electric campaign.

The same could, of course, be said about Audi: the four rings could well decide to enter F1 in parallel with FE, having now ramped-up its partnership with Abt, with which Lucas di Grassi secured the FE drivers' title in Montreal this weekend past.

Porsche joins an already-illustrious list of confirmed brands in the category: Apart from the aforesaid Mercedes, Audi and Renault participation, the championship is (or from 2019 will be) contested by Peugeot-Citroen's DS brand, BMW, Jaguar Land Rover and Mahindra, plus specialist sportscar companies Venturi Automobiles, NextEV and Faraday Future.

The word in Budapest during grand prix weekend was that the next premium brand to enter FE would be from the Fiat Chrysler Automobile alliance, most likely Maserati; if not, Alfa Romeo. Then General Motors and Ford could conceivably join in, so the sky is about the only limit.

Yes, 11 car companies, including three wannabes and yet another newcomer or three - so at least eight genuinely global automotive brands, possibly 11. Any wonder there is currently much mutual backslapping in the corridors of Formula E headquarters?

In 1995 F1 enjoyed no full-blown manufacturer teams save Ferrari

But before Alejandro Agag and his team of Formula E executives - who certainly have reason to be proud of their achievements in building up this leftfield series in the face of much scepticism in a short space of time (three seasons) - could do well to study the boom-and bust effects of F1's sudden influx of manufacturers, starting exactly 20 years ago.

In 1995, after the FIA and Bernie Ecclestone's organisation agreed terms (effective from '98) whereby Ecclestone leased F1's commercial rights, the latter set about attracting car companies to a series that then enjoyed no full-blown manufacturer teams save Ferrari - then a speciality manufacturer battling to move over 3000 units each year - with the rest being independents, some using works engines.

For the record, that year's entry list read: Benetton-Renault, Tyrrell-Yamaha, Williams-Renault, McLaren-Mercedes, Arrows-Hart, Simtek-Ford, Jordan-Peugeot, Pacific-Ford, Forti-Ford, Minardi-Ford, Ligier-Mugen Honda, Ferrari, Sauber-Ford. Important here is to note that most 'Fords' were effectively customer Cosworths badged by the Blue Oval in return for subsidies.

Within a decade Ecclestone's efforts paid off: Renault purchased Benetton and Mercedes invested in McLaren; BMW entered as engine partner to Williams before buying Sauber; Honda returned, initially as engine supplier to BAR before acquiring the team; Jaguar (Ford) took over Stewart and Toyota spent lavishly on becoming the only team outside of Maranello to produce a full car under a single roof, courtesy of TWO identical windtunnels.

Not to be outdone, Fiat's name featured on Ferrari red, and even wannabes such as the Dutch bling car brand Spyker took over what had been Midland, nee Jordan. For 2004 F1's entry list read as follows: Ferrari, BAR-Honda, Renault, Williams-BMW, McLaren-Mercedes, Jaguar, Toyota, Jordan-Ford, Minardi-Cosworth. Spot the difference over just 10 years?

Fast forward five years, and 2010's entry list reads: McLaren-Mercedes, Mercedes, Red Bull-Renault, Ferrari, Williams-Cosworth, Renault (owned by Genii, an investor fund), Force India-Mercedes, Toro Rosso-Ferrari, Sauber-Ferrari, plus three newcomers attracted by the FIA's disastrous budget cap promises - Lotus-Cosworth, HRT-Cosworth and Virgin-Cosworth. Reigning champion, by the way, was the Mercedes-acquired Brawn GP.

To recap: that boils down to fundamentally one major motor manufacturer on the grid - Mercedes - also acting as majority engine supplier, with Ferrari servicing two customer teams (apparently with older tech), Renault partnering the team it moved on to Genii for a pittance, and a host of Cosworth-powered runners, including Williams. A seismic shift over just five years, and one F1 continues to pay a very heavy price for.

Launches were lavish, management salaries extravagant, driver retainers astronomical

What went wrong? Simply put, such was the price of success after brands followed each other into F1 like lemmings that budgets exploded. Where previously teams could win titles on under $100million, double that delivered not a single race win for Jaguar, with $300m not sufficing for Toyota - reduced by 2009 to being the only team on the grid without a victory to its name despite facilities that lacked for nothing.

Launches were lavish, management salaries extravagant, driver retainers astronomical - in 2002 Eddie Irvine was said to be Ford's (then Jaguar's parent) highest paid employee on a stipend (allegedly $30m) not far south of that pulled by William Clay Ford.

Meanwhile, FOM revenues, at 23% of the total 'pot', were largely insignificant when measured against annual budgets, while sponsor income was negligible, largely due to the overall ineptitude of many of the corporate types who were appointed to pressure suppliers into sharing the costs of coming 14th or whatever.

In that number lies the key: with seven brands each with two cars it stands to reason that one of the manufacturer entries would finish at best 14th if no pesky independents upset their finely poised balance by sneaking among them, as was the case in 2003 at the United States GP - situated in then the world's largest car market - when two Saubers and a Jordan placed third, fifth and seventh respectively, and a Jaguar eighth.

Imagine how Ford's chief financial officer at the time, sat in front of his TV on a Sunday afternoon, must have felt about his board pumping hundreds of millions in any currency into funding the 'green dream team' - only to see it beaten by what were considered to be 'backyard specials' operating on 20% of manufacturer budgets, some even using Ford's engines, supplied at bargain basement prices.

Meanwhile, the manufacturer marketing types pumped the same budgets again into below- and above-the-line activation campaigns. Grandstands were block-booked, Paddock Club hospitality suites taken, grand prix broadcasts funded and merchandising ranges developed - all to ensure that notional Jaguar (or BMW or Toyota or Honda) victories were seen by their dealers, fleet owners and punters, and not only rabid tifosi.

Incredible as it seems in hindsight, only one major manufacturer won titles in its own right during that time - Renault in 2005/6, and, let's face facts: Flavio Briatore ran the team as though it were his own entity - while Honda and BMW won a single grand prix each, with Toyota and Jaguar slinking away in shame. For the rest, they had to rely upon independents powered by their (cut-rate) engines, as happened with Brawn in 2009.

Seven manufacturers spending a collective two billion (or more when all was said and done) per annum inherently believed they owned F1; that its income was rightfully theirs; that they should have the overall say in framing regulations; that they could shape calendars; that they, not the FIA and commercial rights holder collectively, held the upper hand. When that realisation came to nought, a breakaway series was threatened.

The legacy of the manufacturers to F1 was a championship on the verge of implosion

Something had to give, and it did: by the end of 2009 the manufacturer club had endured enough, but was saved by the global economic crisis - what better way to save face than blame sub-prime loans rather than blatant ineptitude?

In the process their legacy was a championship on the verge of implosion: TV channels were left without primary advertisers, grandstands, once heaving with green or white or red/white jackets, stood half empty, merchandising areas were left barren. Indeed, F1 has still not fully recovered, its astronomical budgets a carry-over from those days; ditto sky-high broadcast rights and race sanction fees.

After they left, an energy drinks company dominated for four straight years, as though to prove how easy it could be. It took complex engines and the 1500 people assembled by Mercedes to knock Red Bull off its perch.

In parallel FE has done a great job in building up the series; in taking racing into inner cities and attracting new waves of fans; in containing costs and developing technology that may - or not: who knows what alternatives to fossil fuels lurk on the horizon? - power the road cars of tomorrow - and so deserves the recognition that manufacturers currently heap upon the series, albeit with help from major city mayors.

During an interview with Audi Sport director Dieter Gass he indicated that two-car FE budgets were "a little bit more (than the €10m [£8.5m] suggested but series boss Alejandro Agag in May), but not too much more", with a budget spread of around €1.5-2m from poorest to wealthiest.

Paddock consensus currently points to around €18m as being a winning budget, but that, though, takes no account of the sudden influx of manufacturers, nor that motor and battery development will progressively be freed up, with season four (2018/19) bringing a boost in power to 180kW and mid-race car changes becoming a thing of the past from season five.

Such developments cost plenty - and, although FE regulations provide for entrants to purchase competitor technology, any notions of, say, Porsche, popping up the road to Mercedes to buy a drivetrain simply because it's quicker and more reliable is unthinkable. Imagine the field day Mercedes marketers would have.

Indeed, the day of €50m (£45m) FE is not far off if this trend continues, and forget not that the category's TV footprint and global acceptance is still modest. Largely standardised technology also means less sponsorship from partners, placing a greater strain on budgets. Look no further than control tyres for proof: were FE to encourage two or more rubber suppliers, then these would financially support their partner teams.

Of course, as was the case with F1, the manufacturer brigade will subsidise TV broadcasts or streaming, partake in hospitality, take merchandising space, commit to blocks of grandstands for dealers etc, and punt races in their regions.

All well and good, to a point: sooner or later the manufacturer suits will realise that FE is turning a profit off the back of their efforts and demand a slice of the action in order to subsidise their budgets, and then TV fees are sure to rise, as will race hosting fees - and, by extension, ticket prices.

Eventually some car company CFO or other will watch a race, jib at shelling out $50m or whatever to see his cars end 13th and 14th, and pull the plug. Then the downward spiral will hit FE, as surely as it hit F1, which took a massive hit at the time. As outlined, the aftershocks are still evident in many areas.

F1 was, though, resilient enough to cope, but one wonders whether FE will be sufficiently robust when that happens given that by 2019 the series will be but five years old and far from mature. Indeed, it is rather strange to relate, but currently FE is younger than A1GP was when it folded.

One hopes, of course, that it does not come to that, for FE is a genuinely exciting initiative, one clearly right for the times - but it could be in danger of becoming a victim of its own success unless carefully managed, which, by extension, means managing arguably the most ruthless executives on earth: those running motor companies. The biggest challenge will be some form of viable cost control.

Should Agag and co manage that they will have succeeded where Ecclestone and then-FIA president Max Mosley failed, and for that alone FE will deserve to succeed and supplant F1 when and if the world is totally weaned off fossil fuels.