Tuesday, July 16, 2024

McLaren enters Formula E: into the Future of Motorsport

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Another big name joins Formula E. From 2023, McLaren will acquire the Mercedes EQ Formula E team and join the full-electric racing series. There have been several big names going through the championship already, with some pulling out and others coming in. However, it is the first time we are seeing top-end luxury brands, with strong links to motorsport, joining the series. Could these be the first signals of a more important change coming soon?

Not Just McLaren

Right from the first season in 2014, Formula E has seen brands like Renault, Audi, Nio, Jaguar, BMW, Mahindra, Mercedes, and Nissan. The 2019-2020 season saw Porsche joining. McLaren’s announcement follows the one of Maserati published at the beginning of the year, which also talked about this entry as an important opportunity to look at the future of motorsport and a platform for electric cars’ development.

Formula E has had a positive season in terms of the audience in 2021 with a strong recovery over the previous year, but things are not as easy as they look.

Formula E yearly audience and percentage increase (in millions)

First, the recovery comes from a difficult year, in which the sport was heavily affected by the pandemic with the championship starting late and holding only 11 races, with 6 in Germany.Secondly, as claimed by ABB Formula E the growth in 2021 is mostly driven by an increase in free-to-air distribution agreements in several different markets that lacked them before. As a result, countries like Germany, Italy, Brazil, UK, France, USA, and Indonesia saw significant audience growth.

So, while the growth could not be as impressive as it looks, another factor that has most likely limited it has been also the lack of races in Asia, which has been one of the most important stages for Formula E right from the first season.

Finally, another important point is the introduction from next year of the new Gen3 cars. They bring a new design, introduced recently during the Monaco E-Prix, which has sparked renewed interest. Most of all though, they bring another important power enhancement, up to 350 kW from the previous 250. Along with that, the cars will also be lighter, reach a higher top speed, and will be smaller and with a shorter wheelbase which should make them more agile. Overall the changes should translate into a significant performance improvement that will make racing more entertaining.

Formula E Different Generations Cars Spec

Next season will also see an important change in rules. For the first time, pit stops to recharge will be allowed thanks to the new batteries capable of receiving recharge up to 600 kW.

A look at McLaren

With this move, McLaren doubles down on its motorsport strategy expanding once more adding the single-seater electric car series to Formula 1, IndyCar, Extreme E, and the different e-sports series.

McLaren Racing CEO Zack Brown released a statement saying:

“McLaren Racing always seeks to compete against the best and on the leading edge of technology, providing our fans, partners, and people with new ways to be excited, entertained, and inspired. Formula E, like all our racing series, fulfils all those criteria.”

This is important for McLaren’s marketing looking at the future. McLaren enjoys one of the strongest followings on social media, especially thanks to its F1-related reports Unboxed which still proves a winning formula thanks, especially, to the popularity of its drivers’ line-up Lando Norris and Daniel Ricciardo. More diversification will ensure a better reach and potential new audience, especially among the younger fans.

That is not all though. Formula E could be key also from the firm development perspective as it gives another opportunity to further develop EV racing capabilities, after the Extreme E series. The British manufacturer has in fact, like the rest of the segment, started its transition to electrification from the first hybrid model, the entry-level supercar Artura, which entered production and with the first deliveries scheduled for the end of Q2 2022. However, things have been far from simple since the start of the pandemic, and a deep dive into EV motorsports could give McLaren an edge over its competitors in the coming years.

2021 saw a partial recovery from the bad results of 2020, but still very far from the pre-pandemic levels, and the start of 2022 has not been positive as well.

McLaren Full Year and Q1 Sales (2016 – 2021, Q1 2017 – Q1 2022)

Sales in the first quarter of 2022 have been the lowest in 6 years. Naturally, part of this was caused but the difficulties faced by the entire industry. From the aftermath of the pandemic to the chip shortage that is causing severe supply chain disruption for many OEMs. All these factors ultimately caused the delay in production for Artura.

Financial results too have not been really encouraging, with lower revenues and negative EBITDA. In this respect, additional investment dedicated to Formula E could prove a significant burden for the company, but at the same time, the Formula 1 budget cap introduced in 2022 has likely left room for different opportunities for all the companies involved, and also both budget and workforce to redistribute in other motorsport or business functions.

In conclusion, even with Formula 1 budget cap freeing resources, the financial risk is significant for the British automaker that also sold its applied technology division in 2021. Nonetheless, the entry into Formula E could be important for a number of reasons.

A lot will depend on Formula E’s popularity in the coming years, especially with the crucial introduction of the new Gen3 cars. While the sport’s popularity has been recovering from 2020’s difficult season, and new promotional deals are being arranged, it is not yet certain whether this series has already what it takes to become an established reality like other motorsport series.

*Formula E Gen 3 presentation photo

Regardless, by acquiring the Mercedes EQ team, McLaren gets access to a strong team that has already succeeded in 2021 and is currently leading the ongoing championship. If this success will continue under the new ownership it could become another important marketing platform for the brand. Especially by looking at a future of motorsport (probably still quite far) in which EVs will become faster and thus more challenging and attractive than internal combustion engine cars.  

Lastly, even the luxury automotive segment moves relentlessly toward full electrification, and having a strong presence in different related racing series, offers a big opportunity from both a promotional and more importantly a technical development point of view.

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