Delhi recently hosted the first international formula 1 championships in India. In the middle of the hype and excitement, I was wondering if there was any benefit to the Industry and society from such an expensive sport.
It’s not cheap to be in formula One Race. A good example is that the ‘Budh’ International circuit built in greater Noida cost roughly $450 Million. That is almost the yearly revenue of a mid-sized IT firm. Also not to forget the hospitals and schools that can be built with that money. So why does the Auto Industry participate in such an expensive sport?
I have realized that there are three important reasons why auto industry is involved in formula One.
Auto Engineering
Auto Engineering is most important factor. Many brands invest in formula one to come up with innovative advances in auto engineering that can be one day put into commercial production.
British, German, American and Japanese auto companies themselves all invest heavily in racing of all kinds for both technology and marketing reasons according to Martin Thomas a partner in an advisory firm.
Branding
Branding is perhaps the second important factor. A few notable examples are Toyota, Honda and PETRONAS that have got into the sport to improve their brand Perception. Recently Toyota and Honda have pulled out but I believe they have achieved their branding objective.
Martin Thomas recalls how Volvo used Touring Car Racing in UK and Germany as a major tool in changing perceptions of the brand from staid, family oriented safety obsessed to a more dynamic perception for. Also Skoda used racing to move into the premium segment. In formula 1 Ferrari has been positioning itself as a race leader in order to keep their aura of a premium sports brand intact.
Technology & Product Development
Finally new technology and product development is the third factor. Shell for example has been associated with the Ferrari team for a long time and uses its experience from the tracks to engineer better grades of automotive fuels. Similarly a Carbon fiber was first introduced in the race tracks as a light flexible material which is now.
According to Professor Ted Leithart, Formula 1 and aerospace are two fields where new technologies are tested. For example, Hercules he says in the late 1970s introduced a new material called carbon fiber? In his first job after graduating in Mechanical Engineering carbon molds were used in manufacturing ceramics and later used in house applications. In the late 80’s when Prof Leithart was with GE aircraft engines, Carbon fiber engine air intakes and fan blades were used. Now we have Ferraris and other road cars using carbon fiber as the basis of their frame he concludes.
Though it is an expensive sport, there is a lot of advantages in engaging in it. Whether India already dealing with many social and health issues needs to spend that kind of money on formula 1 is a debate which can have many conclusions. I would leave that question for the readers – Let us know what you think!
To get indulge in F1 sports(all auto mobile racing) may have farfetched rewards in terms of “automobile technology evolution”. Iam not anti F1 sports but when I saw the length of the circuit approx. 300km (:-0) it compelled me to calculate the number of liters of petroleum , 20-30 competing cars would be consuming (with mileage = 1.5 km/ltr). Though motor racing is a private venture but it runs on the petroleum which is limited in the world and supply of this fuel often disrupts prices of commodities which sometimes compel the lower class family to sleep without dinner (* I am not trying to promote socialism *) . At the last its individuals wish where he/she want to spend (Yaa it is a private venture and promotes investment in India)his/her hard earned money . There is one question : “On the one side Govt. of India do the awareness campaign for the smart consumption of petroleum by CAR pooling and switching off vehicle in traffic and other side govt. is thinking about waiving the import duty on infrastructure/equipment’s that came along with F1 sports” Does GOI really knows what it wants to do ?
Benefits to the Automobile industry by F1 sport’s R&D is unquestionable but we need to prioritize our basic and more concerned needs. Promoting F1 in India is something like providing your child Usian Bolt’s high class shoes instead of PEN while he/she is going to write Board Exam. Its implication would be that he/she would reach the exam center in right time but without PEN ;).
I won't get into the school/hospital part of it but yes. I live around the same region and the kinda property rates the place demands is not funny. Only if Noida Authorities had built affordable housing (at a profit even, not for charity), it would have provided a number of people a place to live. Also large supply would have also ensured the realty prices are kept in check in the area.
@Yash not sure if I agree with you at all. The issue of the two countries within one is responsible for a lot of social tensions like the one visible in the Middle east. I think most of us have the habit of looking the other way as long as it does not affect us and historically has been our bane. The same issue has followed us from Alexander's invasion in 323 BC to Nadir Shah's plunder of Delhi in 1739 AD. No I am not suggesting that we not allow one half of India to visit the malls and the F 1 track but let us not act as if it does not bother us. because it should and it does.
I am not agree that F1 racing is wastage of money. I think it is good and India will also rise in Formula1.In India if anyone is interested in racing so he will get confidence.
Hi Jaswant
I am not sure how it will make us confident. Only Narain Kartikeyan took part in the race and he has not been able to make a significant impact. If you see the impact that we have made in other sports like Boxing, Wrestling and Badminton they have been significant. Again I get this feeling that motor sport is only a sport for the rich and will continue to do so. In a country where the definition of poor is someone who makes less than Rs 30 a day, I think this is a extravagance we can do without.
Check it out.
Glad you liked the post, there are many sides to a activity like formula 1, the question is whether this is a priority for India now?
I do not buy that. In the recent past much have been said about it vis-a-vis what it would contribute in the India’s development, but same applies for the other sports as well.
Hi Rohit
Can you please clarify, not sure what was the context,
As for tempting middle class youngsters to part with their money – if the middle class youngster has no sense of priorities, then he will not be able to spend wisely, no mater what avenues of expenditure are available. If an F1 ticket costs Rs 10,000 per head, watching all matches of the cricket world cup sitting in the VIP lounge could cost much more. One cannot blame F1 alone for tempting individuals.
Formula One is a privately funded sport. As long as there was no public money used to build the infrastrtcure and land was purchased at market value (which Vicky Chandok confirmed was the case in a recent interview), I am not sure if so much brou-ha-ha needs to be created.
Does India have a culture of racing? Yes, if you look down south in Tamil Nadu, Hyderabad and increasingly Bangalore. ( It is another matter that we have made cricket a national sport when only a handful of states show any interest in it – Tamil Nadu, Andhrapradesh, Karnataka, Maharashtra, Delhi and to a very lesser extent UP, Bihar and Jharkhand.)
While there continue to be issues such as poverty, health and education – that I believe is the government’s task to focus on. Private enterprise has little role to play here and as long as they dont hamper govt’s plans in these areas, we cannot expect more from them. Perhaps it is time we stop any form of entertainment in the country – films, sports, music – and first focus on ensuring health, literacy and poverty eradication.
@ Arch,
I completely agree with you. I stand corrected. If the F1 is a privately funded set up, private enterprise has the freedom to choose where they put their money.
However please note that after the sad death of the son of Azharuddin, the media is negetive on fast driving and I read numorous articles which critisize rich parents in their carelessness in allowing teenagers in buying fast cars, bikes. Even in Hyderabad, except for the race track, we do not have roads to cater to fast bikes and cars. So I still believe, we are not ready for fast travel :)
@Altaf I totally agree and I don’t think racing on the road is any way to enjoy motor sport.
@ ALtaf I agree, and I think a young man in India spending his money on the Indian economy and helping it grow is a much better [proposition than visiting Europe and buying a Mercedes. But read the Face Book comments, they seem to have a valid argument too. What do you think?
@Yash @Amit @Arun I agree but isn't that again the question of the two India's, one that hosts Formula 1 races and Multiplexes and the other that lives in absolute squalor. Is that sustainable? Is this what we want the legacy of our generation to be? I would like to know what you think of that?
@Vikram, I am sure you are not trying to suggest that the India that can afford to goto Multiplexes and malls and Formula 1 races should not do that because the other India can not afford to.
Yes there are other Indians who have not yet benefited to a great extant with the economic boom since the 90s but mind you its only private enterprises that will ever do any good for them. It is not government's job to make people rich and it will not perform that function, not the least in India.
The only way that the other India can raise its stand of living is with education and jobs. Education is something government is doing its best about and for jobs only private enterprises will be able to provide jobs.
Running short on time right now, may be I will put my thoughts in an article .. :)
The question is not if F1 is waste of money. It should be ‘do we need F1?’.
Just becasue we can does not mean we must (host the event). We do not have racing culture in us. We drive on congested roads and every thing discourages us from speeding. The traffic police, the traffic itself, the narrow roads, the pits and all.
We do not have express ways. Most Indians do not have lane sense. What do we need racing tracks for? OK we built them, are we using them to train our next gen in racing? Dont say yes. Look at CWG infrastructure. We are reading news that after the event was over, they were scarecely used. So why F1?
OK agreed that a developing nation needs modern national assets but have we grown to have F1 culture?
Now comes the eventual question of how much money is spent on a wasteful asset? What ever be the amount, the question should be do we need to waste money, where it could have been used, etc.
Suppose if India is a middle class youngster and he started earning about 50K per month, what you recommend him to do with his disposable income? Do you recommend him to buy a house, invest in stocks, invest in his kids education, pay back debts Or you recommend him spending on a trip to Europe, buy a Merc on loans, etc? Just coz bank lends you a loan does not mean you must buy a Merc. You must keep in mind your background, how difficult yester years have been with you, where you want to be in certain years ahead. Its not that having fun once in a while is bad.
Just my middle class mentality :)
Just my two paisa :)
formula 1 is required for branding ourselves in the developed economy and attract more investors in that specific domain.
Regards,
Shubra
http://www.vibhishan.it
http://www.reallysucks.in
Motor sports is a business. It started out as enthusiasts racing their cars and developed into a business venture just like every other major sport has – be it football, cricket, basketball or boxing. It has got nothing to do with national sentiments. Whatever money was invested in the Indian F1 was private money. It was no different than a businessman starting an airline, opening an amusement park or making a movie. It's a for profit business venture where spectators buy tickets and the eye balls are monetised with broadcasting.
India should not organise such expensive sports is a socialist/populist argument. Unlike CWG it was not organised by "The Republic of India" from tax payers' money. (UP government granting the event tax exemption was a different story but it was questioned by the court). And apparently about 1 lakh people could afford to buy the expensive tickets. F1 came to India because now there's a sizable chunk of population who CAN afford to spend that kind of money for a day's entertainment.
To answer your question "Is Formula 1 a waste of money?", I would say absolutely not. The organisers made their investment back from ticket sales and broadcasting. Audience (those who are interested and can afford the tickets) get entertainment for a day. Drivers get their money from teams and teams have various motives, some use it as a branding vehicle, some like Vijay Mallya are in it for value appreciation of their investment. So everybody gets their money's worth.
As for spending that money for public good, again that is an argument that looks good in a political manifesto. Nobody can dictate private individuals and corporations where to spend their money.
Just FYI, I am not a F1 fan, the only sport I understand is cricket.
Yash.. You just spoke every word on my mind…Infact the government was red faced with the success of the event. And i suspect a big hand in stupid channels saying how so much money was spent on entertainment of Rich people etc. Also to the part of giving the tax exemption to event, Weren't the Multiplexes given tax exemption for the entertainment of "upper" Class??? Why did they not object then? I absolutely agree the exemption to tax coz any new sport does require this initial concession and as you rightly said that was the reason the tickets were affordable…
Absolutely liked your comment ( except for the fact you not being a F1 Fan.. lol)
Yash….I could not have put it better…fully agree with what you have said…
I have been breaking my head trying to explain exactly this to people… Infact, I applaud Jaypee for making such a big investment. It not only puts India on global stage of sports, but increases employment. And to top it…Govt. only earns revenues from taxes…
One more point I forgot to mention earlier –
Any activity where money changes hands is beneficial to the society and the economy. If $450 m were invested in building this facility then that means that much money changed hands. From construction material suppliers to labourers who built it benefited from it. And a major chunk of that went to Indians. It has and will continue to provided employment to hundreds of people. It does not take a degree in economics to understand the Economic impact (positive) of that investment.
Arun Prabhudesai Precisely. Govt earns money in the form of tax and people get employment. And it also helps in enhancing the image of India in the world. Similar questions were raised about India's moon mission as well which was in fact undertaken with public money. That too was an investment to show India's space capabilities to the world and has huge economic impact on India's chances in the International commercial satellite launch market.