Formula One: Debunking the BP rumour

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Over the past week various news outlets have reported BP are set to enter Formula One with a $30 Million sponsorship deal heading the way of either Renault or Mclaren. Whilst there is no formal comment from any party to confirm or deny the story, a little bit of a sanity check might be helpful.

The optimisation of current the iteration of Formula One power unit technology is more dependant on fuel and lubricant specificities now more than any time in the history of the sport. Power units and their respective fuel and lubricants are developed in conjunction with each other. Whilst the fuel used in Formula One is made up of 99% the same compounds you would expect to see in the forecourt, the remaining 1% has a huge impact on vehicle performance and is unique to each and every supplier.

At this time there are 4 power unit manufacturers and 4 fuel and lubricant suppliers in Formula One. These are:

Shell with Ferrari

ExxonMobil (Mobil 1 / Esso) with Honda

Petronas with Mercedes

Total with Renault.

All teams using customer power units will use the fuel and lubricant supply defined as above. Any additional fuel and lubricant sponsorship with customer teams are sponsorship partners only. They do not supply the team.

Unlike agreements such as that with BR Petrobras and Williams, given the comparable size and market share BP have to Petronas, Shell, & ExxonMobil it is highly unlikely either party would be prepared to have a customer team run with BP branding and a competitor’s fuel and lubricant supply.

The development of fuel and lubricant solutions is a continual process, at any given time Shell, for example, could have up to 65 compounds in development. Fuel and lubricant partnership is integral to a team. In 2015 Scuderia Ferrari attributed 25% of their performance gains through the season to Shell. Fuel and lubricant suppliers bring trackside laboratories to every F1 race. They analyse the performance of their product after every session. Relationships are so well developed that a fuel and lubricant supplier can and do advise a race team on how to approach race strategy.

Fuel and lubricant suppliers do not enter Formula One for simple brand exposure. They use the sport as a platform to innovate. Innovation reaching the circuit can take as long as five years to hit the forecourt. Formula One engagement is not a short term quick win project.

In short, if BP were to be entering Formula One the undertaking and commitment would require a significant change in business strategy. It would be much more complex than writing a cheque for $30 Million. If a new partnership is not already known it would not be realistic to expect anything for at least 2 years. With all this in mind it seems highly unlikely BP would find an existing power unit manufacturer prepared to leave an existing partner for the foreseeable future.

What could be possible is an acquisition. This could take a number of forms. An existing fuel and lubricant supplier could be looking to exit Formula One. They may look to sell their assets and technology in the sport to BP. With consumers looking increasingly to renewable energy sources the return on investment of motorsport engagement may no longer be what it once was so this is possible.

Another option could be BP acquiring, or being acquired. Both Shell and ExxonMobil have been reported to be considering growth through acquisition strategies. If this was the case, they may look to showcase the BP brand through their premier  marketing platform. Equally if BP chose to merge or acquire Shell, Petronas, ExxonMobil, or Total, they may seek to promote the BP brand in F1. At this time it is not possible to entirely dismiss rumours of BP entering Formula One, but one thing is for certain, if a deal does transpire it will be a lot more complex than writing a cheque and putting a few stickers on a car.

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