After many months of speculation, German automaker Volkswagen gave the green light to subsidiary brands Audi and Porsche to buy into the prestigious Formula One racing circuit. Formula One, also known as F1, is the highest class of international

autosports

for open-wheel single-seater formula racing cars.

Having an F1 team costs a lot of money

Formula One cars are the fastest regulated road-course racing cars in the world, and the cost to run a team for a season runs in the hundreds of millions, according to

EssentiallySports.com

. In recent years, three teams—Mercedes, Ferrari and Red Bull—have dominated both the track and the budget caps of Formula One spending upwards of $400 million on just one season of racing.

In spite of the high overhead, Audi and Porsche are poised to make serious money upon buying into Formula One.

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Formula One teams are a high risk, high reward proposition

The payoff to not only buying into but winning a Formula One race is major for any brand, but a buy-in of this size doesn’t come without risk. The popularity of Formula One racing is only growing, and according to

Bloomberg

, experts like Volkswagen AG’s chief executive officer Herbert Diess predict that F1 racing will be the biggest motorsport spectacle in the world in the coming years.

In 2021 across a 22-race calendar, the reported annual revenue for Formula One was $2.136 billion. It was a significant year for the $92 million in profits made after losing $386 million in 2020 due to the COVID-19 pandemic.

For automakers, having a winning Formula One car is basically a ticket to success. Winning an F1 race boosts brand image across the board, not to mention the money than can be made from co-branding and sponsorships. Unfortunately, the winnings go both ways, as teams that finish last tend to suffer in sales as well.

MORE: Formula 1 Cars Will Soon Be Powered by Sustainable Fuel

How Audi and Porsche plan to enter F1

While spokespeople from both brands declined to confirm specifics of their Formula One plans, there are a few avenues that could be explored. Both Audi and Porsche have supplied engines to other teams in the past, notably, Porsche briefly supplied McLaren with turbocharged engines in the 1980s.

The other options for entry are buying out an existing team or most challenging and costly of all, launching and engineering their own platform from the ground up.

Nothing is set in stone yet, but

Reuters

reported that Audi is prepared to offer $556.3 million to acquire Biritsh automaker McLaren as a means to enter, while Porsche is aiming to establish a more long-term partnership with Red Bull’s racing team.

The unofficial plans with Red Bull include supplying power units to the successful racing team. “Both premium brands see it as the right decision [to join F1] and are prioritizing it," said Diess.

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MORE:

A Look at the 2022 Formula 1 Car

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