Mercedes sets new financial benchmark in F1 with record £546.5M turnover

Mercedes -Benz Grand Prix Ltd., the company running the Mercedes-AMG Formula 1 team, has reported a staggering £546.5 million turnover for the 2023 season, according to its latest published accounts.

This figure represents an increase of £71.9 million over the 2022 figure of £474.6 million, solidifying Mercedes' position as the first F1 team to exceed the £500 million turnover mark.

Financial dominance

To put this achievement into perspective, Red Bull Technology, the company behind Red Bull's F1 team, recorded a turnover of £385.6 million in 2023, highlighting Mercedes' financial dominance within the sport.

However, despite the substantial increase in turnover, the Brackley-based outfit reported a slight dip in profits, down to £83.8 million from the £89.7 million declared in 2022.

Increased costs and tax implications

The reduced profit margin can be attributed to a combination of factors, including increased costs and higher tax payments in the 2023 financial year.

Race car development assets, which are carried forward to the following season, rose from £41 million in 2022 to £52.2 million last year, reflecting the additional investment required to develop the team's 2024 F1 challenger, which necessitated a new chassis.

Furthermore, Mercedes reported a significant increase in average staffing levels, rising by 175 to 1,289 employees in 2023, compared to 1,114 in 2022.

Consequently, the team's salary bill soared by £29.6 million, reaching £111.7 million, although a portion of this increase can be attributed to the increased staff bonuses resulting from the team's second-place finish in the constructors' championship, an improvement from the previous year's third-place position.

Tax implications

The team's 2023 figures included a deferred tax asset, which contributed to the unusually high profits reported last year.

Additionally, the UK government's decision to increase the corporation tax rate to 25% in April 2023 from 19% in 2022 led to a substantial £23.7 million jump in Mercedes' tax bill, rising from £8.6 million in 2022 to £32.5 million last year.

Despite these factors impacting overall profit, the business appears to be on a solid foundation, with its EBIT (Earnings Before Interest and Tax) remaining relatively stable at £113.8 million for the year ended 2023, compared to £113.6 million in 2022.

Commercial success and growth

While Mercedes finished the 2023 F1 season in second place behind Red Bull, improving upon its 2022 performance, the team reported a decline in television coverage due to fewer podium finishes.

However, other commercial metrics showed robust growth.

The team's Advertising Value Equivalent (AVE) remained strong at $5.3 billion, and its social media presence continued to expand, with a cumulative followership of 36 million (+15%) and a total of 465 million engagements (+9%).

Additionally, Mercedes welcomed seven new commercial partners and introduced a world-class hospitality offering at the Las Vegas Grand Prix, catering to the increasing demand for VIP race attendance as F1's global popularity surges.

In July, Forbes estimated the value of the Mercedes-AMG F1 team to be $3.8 billion.