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So You Want To Go GT3 Racing? Part 4

The cost of Covid...

Missed any of the earlier parts to this series? Catch up by reading Part 1, Part 2 and Part 3.

The penultimate instalment of DSC’s ‘cost of racing’ feature series has arrived. Today’s focus is the impact of the global pandemic, which has put motorsport on hold for the past few months.

As we go back racing around the world, there are so many questions yet to be answered. Will grid sizes in the major championships remain strong? Will the championship organisers take a significant hit? Will cross border/continental travel become more expensive? Will we see a decline in gentlemen drivers willing to spend big on programmes? How will manufacturers react in the medium term if budgets are squeezed? And will privateer teams be able to ensure their businesses are sustainable?

With so much financial uncertainty in most areas of industry going forward, the amount of money spent in motorsport is going to become more and more of a talking point with each passing month until the global economy recovers to anything close to pre-COVID levels.

Right now there are simply no definitive answers to what motorsport will look like in 1, 2, 3, 5 or 10 years time, though a selection of the group interviewed for this project were keen to share their thoughts and feelings with DSC. (In line with the other pieces in this series, everyone handed a platform to have their say will remain anonymous)

Here’s what they had to say:

So, where do we go from here?

Team owner A: “I think every situation for teams and gentleman drivers will be different. You’ll find that one person has their company evaporate and won’t be able to go racing, and one guy has found that his sector is doing well.

“I think there’s naturally going to be a drop in amateur drivers funding teams, plenty will be hit hard. I do know two or three people who are busier than ever and can’t wait to get back racing because they’ve already paid for their racing season before the pandemic. I also think there’s a bigger picture.

I think there’s naturally going to be a drop in amateur drivers funding teams, plenty will be hit hard

“Let’s say GT4, you can take that as a middle formula. There will be some people in that that can’t afford to do it anymore. So you can argue that grid will get smaller. Then you could argue though that are some people in the class above, in GT3, that can’t afford to do GT3 anymore but can afford to go racing. So they may drop down into those places. You could go right down to things like the TOCA package and Ginetta’s series, there’s someone who might have wanted to do Porsche Carrera Cup that now that can’t afford it now, but is separate to stay racing and drops into the Ginetta Super Cup or something. That can happen anywhere.

“Certainly the series that will lose out the most are the most expensive ones that require big investments. Who knows if that is right or wrong? But the people in LMP2 who can’t afford the WEC, will they do ELMS now?

“As small percentage of people will be wiped out, you won’t see them again and a larger percentage of people will struggle to afford the series they thought they would do, so will find something cheaper. But there will be a small percentage that say: ‘what crisis? I’ve never made so much money’ and invest more. I just worry for expensive championships with small numbers in big ticket classes, if you lose a few LMP1s from WEC and a couple of DPis from IMSA and before long you haven’t really got a class anymore. If the manufacturers that have been propping up GTE and GT3 are not selling any road cars then they will pull the plug on investment for a while.

“If you can’t imagine any manufacturer thinking that this is a great time to start a new project, and you can’t imagine a board room prepared to invest millions, then you know that those with the ideas will be shown the door. And they will be followed in by someone looking to extend a current programme or project, and they’ll have to fight to keep things going the way they were. It could get scary.”

Team owner B: “I think things like the WEC won’t change, because those involved are high worth. I don’t think it’ll effect them. The only thing is manufacturers. Will they spend that much money if they have to lay off people? I do think your Carrera Cup level, GT4 level, family money, you’ll lose people from them. Because the businesses behind the people who bankroll those may have had to let a lot of people go, so it wouldn’t look good spending money on racing.

“We’ll have to work with it, we will go back racing again, with crowds, but we’ll just have to see who is left when we get there.”

Team owner C: “Where do we go from here? Wow. What a question…

“Well what I would say is that if I was racing in Asia predominantly right now, I’d be worried. What worries me when I look at the situation, is between the definitive end of this virus, which will come, between that and the resumption of what we consider ‘normal’ is going to be a fair amount of time. For international travel to go back to where it was will take time.

“Most are ready to go racing at the drop of a hat, but for the situation to become palatable again, for some will take time. And between now and then, there’s no revenue coming in.

“We will have to see if the economic return is U shaped, and we won’t know how long a recovery will take. We need to be realistic, a lot of investment is needed, going racing is not something you take lightly. For many a return will be cautious.

“It’s going to be interesting. Will we see, for instance, a growth in participation of the one-make cup series, because it’s cheaper and more low key? I am a pessimist at the best of times, maybe a realist. I just hope the people who pay the bills don’t see motorsport as unnecessary going forward and get interested in new hobbies that are cheaper. Because right now manufacturers can’t sell cars, so once the current commitments are up in terms of factory motorsport, getting people to commit to new cars, championships, programmes, is going to be tough. So much is spent in advance that we may not see the effect for a year or two.”

Team Owner D: “I don’t see the manufacturer dollar being around to be able to run pro entries in the numbers they have been recently.

“But I think the gentleman driver side of things is going to be alright. All the gentlemen I do dealings with still want to drive. Whether or not they want to drive this year is up in the air, but they would still want to roll over to 2021 and race then.

“Many had already paid for a season before this started. And when you talk to them, they want to get out of the house and do something fun. I know people who have been going testing almost for the sake of it because they’ve been so bored.

The one thing this might do is get rid of the saturation of championships around the world

“There are plenty of guys around that from this situation will make money. And there are lots that will lose money but there will be a lot of new money around too which will filter through and enter the sport.

“The one thing this might do is get rid of the saturation of championships around the world. I’ve believe the FIA sanction 303 categories a year, and 89 international series. If you took an average of 20 cars on the grid, which is about what people get on average, it works out at 6060 cars operating. Then if you went to an average spend of 100 grand, which is nearly nothing, I mean you could burn through that in club racing easily. That’s still 600 million Euros.

“They say there’s no money in racing, but there is more being poured in right now now than ever before.”

Manufacturer representative: “This is a good question! The strategy I think should be employed is this:

“Look at the turnover (for the customer racing arm at said marque) we have, it’s XX million a year, it carries its own profit and loss accounts. All of us on the board are accountable for what we spend and generate, and we generated XX million last year.

“A third of that is head-count, personnel costs, we have over 100 people working on customer racing and a third of those are working in production. So the first thing I would do is remove most of the production team, not making them redundant, but redeploying them into automotive development or working on the production line. They don’t need to be laid off.

“The reason for this is that I don’t see a lot of new race car sales happening. So the best thing to do is to trim overheads and focus on helping the second hand motorsport market and allow it to flourish.

“From my experience, if we sell a GT3 car at between 400-500 thousand pounds, by the time we’ve covered the cost of the parts of that car and the proportions of design and development costs that go into it, there’s no money in it, you make a loss on every car. Where you do make money is by halting the production of cars. We need to collectively stop trying to get them out of the door and just sell spares to teams, help them race.

“At that point, if the cost of staying in business because you’ve redeployed your production staff, and you focus on helping sustain old business, then you’re winning. That’s the best thing for a manufacturer to do.

“It’s a real challenge for a manufacturer though. I’ll give you an example: customer support engineers are so hard to find and keep hold of. Because you don’t have the money to spend, you can’t afford to bring in one on the salary an F1 team could, so most engineers you end up with in GT racing, especially in customer support, are kids that have come out of university, earning their stripes. They are A: are hungry and ambitious, they want to go racing in Formula One or at Le Mans, and you can’t afford to pay them money to retain them, so you end up with a permanent churn of young engineers coming through, getting experience then moving on.

“And that’s one example. There can be such a turnover of staff at significant levels and that’s hard to navigate during a time like this. However, I guess the good thing in an economic downturn is that they are low cost to keep on and are less likely to move on because there are not as many opportunities elsewhere.

“Another issue is going to be teams that are currently suffering from finance payments on cars that they can’t race or may not be able to race for a while. At Lamborghini, for instance if you buy a GT3 car you go through Volkswagen finance. But the hardest thing is with anything in finance, whether you are buying a Citroen Saxo or a Bugatti Veyron, is what it is secured against, what assets. Whether it’s personal liability, or whatever. The problem is that a race car is a very dangerous thing to secure financing for, because if you chuck it at a wall hard enough, it’s worth nothing. And right now the market has dropped, people aren’t buying cars in the same numbers, so they’re suddenly worth less.

A race car is a very dangerous thing to secure financing for, because if you chuck it at a wall hard enough, it’s worth nothing

“A good example is what I can draw from my experience in selling GT4 cars. If I sell one at between 150-200 thousand pounds ex works, and we know that no matter how old they get they never drop below a hundred grand in value, because it’s not like a road car that you run into the ground, it’s always getting new parts. You see GT4 cars change hands north of 100 grand on the second hand market regularly.

“If you think of that, if you buy it at the full price, the residual is amazing, but it’s always supply in demand. How much demand for second hand race cars is there now? Lots of customer teams will have taken a risk, and if they need to sell a car now, or they always planned to sell their car this year, they’re going to take a hit. The price of race cars has gone through the floor now, who is going to buy one?

“It’s a bad climate.”