The F1 engine token system and why it is not working

When the F1 rule-makers were formulating the current hybrid engine formula, the usual negotiation and horse-trading took place between the potential (mostly then-current) engine manufacturers. Renault, perhaps worried that a spending competition would leave it with an inferior power unit, was one of the proponents of what became known as the token system. The power unit was divided into a number of sub-assemblies, and changes to each sub-assembly were given values expressed as a number of tokens. The number of tokens allowed for development would be fixed after homologation, development would not be allowed in-season, and the number of tokens for off-season development would reduce over several seasons. The idea being that massive engine component development would be curtailed, and as engine manufacturers refined their powerplants, everybody would converge on more or less the same performance.

This looked like a good idea, and all of the engine manufacturers signed up to it. Renault, Ferrari and Mercedes all built power units for the 2014 season. But…by the second day of pre-season testing, it was clear that, relative to Rernault and Ferrari, Mercedes had built a par more powerful unit. The difference was so large as to be embarrassing. Hampered by the rule against in-season development, Mercedes powered cars enjoyed a significant horsepower advantage through 2014. Ferrari and Renault were limited to reliability changes, and improvements obtained by changes to fuel and engine electronics. That helped them some, and Renault scored 3 victories, but all came when Mercedes powered cars hit problems.

At the end of 2014, two teams, Manor/Marussia, powered by Ferrari, and Caterham, powered by Renault, ceased operations. In addition, Lotus moved from being powered by Renault to being powered by Mercedes. Renault therefore lost 2 out of 4 teams running its power units, with a commensurate loss in revenue and mileage for data collection. Ferrari lost 1 of its teams.

Honda’s entry to F1 in 2015 complicated matters. When the engine manufacturers got together to discuss how many tokens should be available for development, it became clear that the rules had not been written tightly enough to preclude in-season development from 2015 onwards. So design and construction improvements to the power units were possible in the 2015 season. After yet more negotiation, the engine manufacturers determined how many tokens were available for development in 2015, and Honda was awarded the average of the other 3 engine suppliers’ token number, since their engine, homologated in March 2015, would otherwise have been frozen.

In 2015, it has become clear that while Ferrari is a lot more competitive with its power unit, Renault is less competitive and less reliable. The more restrictive rules on power unit life have already led to Renault-powered cars accumulating grid penalties after they ran over their allocation of power unit components due to reliability issues. The Mercedes powered-cars are enjoying almost bullet-proof reliability from a more powerful power unit. The non-Mercedes powered cars, with the exception of Ferrari, are struggling to stay on the same lap in races.

By common consent, Renault needs a completely re-designed power unit to have any hope of approaching Mercedes. The challenges are (a) lack of money to develop new components, due to loss of 2 teams (who were, if reports are correct, paying around $40m per team for engine supply in 2014), and (b) lack of enough tokens to support a complete re-design.

Renault is now hamstrung by the very system that it proposed back in 2012 when the new engine formula was being finalized. They are unlikely to be able to create a competitive power unit within the current token system, and the shift to in-season development has further moved the engine development process away from their original vision, which was focussed on out of season development based on defined limits to the number of changes. Honda is also hamstrung not only by the token system, but also by the onerous engine life rules, which are also resulting in Honda-powered McLaren cars collecting massive grid penalties.

There is a real risk that Renault will leave F1 soon, especially given the appalling relationship that they currently have with Red Bull Racing (and, by extension, Toro Rosso). When a team with which you won 4 drivers and constructors championships as recently as 2013 is publicly excoriating you weekly, it is difficult to see any positive upside to remaining in F1.

No privately-funded engine development company can afford to enter F1 under the current rules. Although it is difficult to determine how much money Mercedes has spent on its F1 program, numbers upwards of $300m seem to be a starting point. Only a large-volume manufacturer could afford that size of outlay on an engine design and build process. The high cost of the power units is also distorting the power balance in F1, with the “grandee” teams now threatening to swallow up the smaller teams. To be fair, part of that is due to the teams now controlling the rules via the Strategy Group, another crazy adventure of the “fox given keys to hen house” variety.

The token system might have worked if all of the engine builders had produced power units of relatively similar performance. Then a smaller number of tokens would have been used for incremental improvements.. That is not what happened. Mercedes produced a far superior power unit, and the rivals are now unable to easily catch up due to the engine reliability rules, token limits, and, in the case of Renault, lack of money.

If F1 wants to continue with multiple competing engine suppliers under the current formula, some way has to be found of giving Renault and Honda a better chance of catching up with their power unit designs. The easiest way would be a combination of a scrapping of the token system and a relaxation of engine reliability rules. Mercedes is bound to vote against such a move (why would they vote for it? They have the best powerplant by a large margin) and their customer teams will vote the way that they are told, so it is unlikely to pass the Strategy Group.

My short summary: with the current Strategy Group process, any engine supplier not named Mercedes Benz High Performance Engines is, to a varying level, screwed.

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