Meet the F1 teams: Behind the race on the track is the competition of business models

Our reporter Qu Zhongfang reports from Shanghai

On April 19, on the opening day of the FIA World Formula One Championship (F1) Chinese Grand Prix in Shanghai, the reporter of "China Business News" visited the showroom and maintenance area of the Mercedes-AMG Petronas F1 team. The Mercedes-AMG Petronas F1 Team, based in the United Kingdom, has won seven consecutive Drivers' and Constructors' Championships from 2014 to 2020, and in 2021 set a record of eight consecutive Constructors' Championships. This year marks the 20th anniversary of the F1 Chinese Grand Prix, and the return of the event to Shanghai after a five-year hiatus.

During the visit, the reporter happened to meet a number of mechanics of the team who were repeatedly practicing tire change on the spot. Tyre change is a complex and critical task for a Formula 1 car, with mechanics dismoving, fitting and adjusting tyres within a set time frame to ensure the car's best performance on the track.

Our reporter also interviewed Bradley Lord, Chief Communications Officer of Mercedes-AMG Petronas F1 Team, and Hagen Heubach, Head of Global Automotive Industry of SAP, as the team's official partner. Among them, Bradley Lord said in an interview: "F1 is not just a competition on the track, it is a competition in all aspects of the business model. In order to be able to stay ahead of the curve, you need to be at the forefront of technology and innovation, and that's where SAP helps. ”

"Cost Cap" vs. "Buffet"

"Before there was a cost cap, you could imagine F1 as a 'buffet' where you could eat the best king crab and lobster...... There's no trade-off. When the cost cap is in place in 2021, the team needs to think carefully - from the use of every component, manufacturing, procurement, etc., to ensure the performance and maximum benefit of the race in the limited cost control. Bradley Lord said.

It should be pointed out that the "cost cap" he mentioned is actually a "budget cap" rule issued by the FIA in 2019 to set a unified budget cap, which was implemented for the first time in the 2021 season. Before the implementation of the budget cap rule, the annual budgets of a few strong teams in F1 once exceeded $500 million, while the budgets of individual small teams were less than $100 million, which led to a large power gap between F1 teams, and when there was no suspense about winning or losing, the competitive atmosphere and spectacle value of the race were also affected. In order to create a relatively level playing field and promote the sustainable development of Formula 1, the FIA has introduced the budget cap rule. If a team exceeds the budget cap, it will face different degrees of penalties, including fines, points deductions, bans, restrictions on research and development, etc.

Bradley Lord said that F1 has always been innovative and evolving, especially after the implementation of the cost cap, F1 is not only a competition on the track, but also a competition in the business model and all aspects. Mercedes-Benz is committed to reducing the impact of cars on the planet around the world, and this is just as important in the race. "We produce power units and complete vehicles, providing comprehensive F1 vehicle solutions, so we have absolute control and influence over the entire product life cycle of the car. By 2026, we expect to be 50% electrified in Formula 1 and use 100% sustainable advanced fuels. Bradley Lord pointed out that on the one hand, it is important to show that F1 is the top race, at the forefront of technology, and hopefully to keep F1 thriving for the next two or three decades, and on the other hand, to show the world that sustainability can be achieved through the use of newer technological innovations.

In the showroom and pit area of the Mercedes-AMG Petronas F1 team, the reporter observed that about a dozen screens are placed in the small space, and their purposes include watching real-time live broadcasts, and there are many real-time data monitoring for visualization, such as vehicle performance, tire strategy, fuel consumption, pit stop time, etc., which are inseparable from data analysis to optimize. In addition, when a race car pits, dozens of mechanics quickly gather around the body, quickly completing a series of tasks such as changing tires, refueling, adjusting settings, cleaning, replacing power unit components, repairs, safety checks, documentation and analysis.

Supply chain resilience is an issue for the entire automotive industry

Efficiency is an important cornerstone of Formula 1's success. The Mercedes-AMG Petronas F1 Team is working with SAP in two important areas: tackling the challenge of cost caps and optimizing complex supply chains.

Hagen Heubach, who has been with SAP for 17 years, is currently the head of SAP's global automotive industry, where he leads the overall implementation of SAP automotive solutions and plans SAP's strategy for future mobility and new business models. Hagen Heubach pointed out that the entire automotive industry is currently facing the challenge of supply chain resilience, and in the case of F1 races, even if a component does not arrive at the designated track on time, or the component does not arrive at the automaker's factory on time, it can lead to the shutdown of the entire production.

According to Hagen Heubach, SAP helps the Mercedes-AMG Petronas F1 Team accelerate operational efficiency and unlock data insights to improve performance. The fleet uses SAP S/4HANA Financials to allocate, save and use resources more efficiently. With embedded SAP Business AI capabilities, fleets can budget costs, forecast final spending needs, and optimize supply chains and inventory. On the operational side, the Mercedes-AMG Petronas F1 Team leveraged the SAP S/4HANA Cloud private cloud solution to build a secure, future-proof cloud environment. Fleets can also leverage SAP Build solutions and SAP BTP (Business Technology Cloud Platform) to create a transparent, intelligent enterprise architecture that integrates data and systems from various sources into a single view. This shortens the lead time for critical automotive parts and ensures a seamless supply of parts during the weekend races.

Regarding the increasingly stringent ESG (Environmental, Social and Governance) requirements, Hagen Heubach mentioned that it is not easy to track and calculate the carbon footprint, it is difficult to calculate the CO2 emissions generated by the production of a racing car, and it is important to connect all the value chains in the process, and the carbon emissions generated from the production of a car all the way to the lithium battery must be calculated. SAP is now investing in software to track and calculate all carbon footprints, including those generated by OEMs and all suppliers, which can be linked to help F1 teams decide to choose more sustainable suppliers, more sustainable raw materials, and even reuse certain components to improve recycling capacity.

(Editor: Wu Qing Review: Li Zhenghao Proofreader: Yan Yuxia)