Transcript: Formula One’s road map to success

This is an audio transcript of the FT News Briefing podcast episode: ‘Formula One’s road map to success’

Marc Filippino
Good morning from the Financial Times. Today is Friday, March 1st and this is your FT News Briefing.

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We have a show for you today about all the things that move us, literally. We’re talking about cars like Toyota’s bet on hybrids.

Peter Campbell
So Toyota’s share prices almost doubled in the last 12 months as people suddenly realised, maybe they were right all along.

Marc Filippino
And also something a little faster than hybrids.

Sam Agini
Formula One, from facing existential crisis in the pandemic, they come out flying because there’s all this pent-up demand for live events, yes, but also their product.

Marc Filippino
I’m Marc Filipino, and here’s the news you need to start your day.

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Rishi Sunak’s plan to send UK asylum seekers to Rwanda could cost the country at least £580mn by the end of the decade if it gets approved, that is. The prime minister is pushing legislation through parliament that will declare Rwanda a safe country for asylum seekers. The £580mn estimate, which comes from the National Audit Office, is the first complete breakdown of costs. It includes aid payments to Rwanda of up to £500mn, plus another £80mn in operating and set-up costs. The plan has been heavily criticised by charities, rights groups and opposition MPs. The price tag is not expected to help with that, and Sunak’s proposal will probably hit a bunch of legal hurdles in the UK as well as in international courts.

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Toyota was absolutely slammed by critics for pouring money into hybrids instead of focusing on fully electric cars. But the Japanese company’s hybrid models have been a massive success, so it seems like Toyota was right. Well, at least for now. Peter Campbell is the FT’s global motor industry correspondent. He’s here to talk about the booming hybrid market. Hi, Peter.

Peter Campbell
Hello.

Marc Filippino
So, Peter, what does Toyota’s hybrid vehicle success look like?

Peter Campbell
So Toyota, as you know, has led the way in hybrid development for many years. In 2022, Toyota sold about 2.5mn hybrid vehicles globally. That’s of course, both Toyota and Lexus. And then last year, this rose to 3.5mn. And Toyota thinks it’s gonna carry on rising. They’re projecting that in 2025 they’re gonna sell 5mn hybrid vehicles. So this will help the company’s profitability. And you’re right, for a long, long time, everybody had basically asked when Toyota was going to get with the programme on battery electric vehicles, right? Cars that don’t have an engine at all. And Toyota has had lots of reasons for why they wanted to focus on hybrids. And over the last year globally, we’ve seen a slowdown in the growth rate of electric vehicle sales. And what this has led to is a massive correction in Toyota’s share price. So Toyota’s share price has almost doubled in the last 12 months as people suddenly realise, maybe they were right all along.

Marc Filippino
Let’s talk about hybrids a little bit more. Why do consumers like them so much?

Peter Campbell
There are different types of hybrids, but basically all of them use a battery and all of them use an engine. The really good thing about hybrids is the engine. So the engine means that you can drive on either low fuel or no fuel for a while, but you will never be stuck at the side of a road because the charger didn’t work. And we know that the biggest concern people have about battery electric vehicles is that they will be stranded, needing to charge somewhere. And almost everybody among the early adopters has a horror story at some point of having been stranded because the EV chargers didn’t work. But lots of people want to go greener and hybrids are a very natural bridge technology that let people do that without them a) having to buy electric vehicles, which still are very expensive, and b) without ever having to be worried about being left at the side of the road.

Marc Filippino
So we’ve been kind of talking about this through the lens of Toyota’s success with hybrid models, but our other carmakers starting to take notice.

Peter Campbell
Well, Honda has been making hybrids similar to Toyota for a very long time, and they’re very successful as well. Ford said it expects its hybrid sales this year to double that rate of growth compared to last year. And even General Motors, which sell plug-in hybrids then stopped selling them, is now bringing them back because they now realise that they’re going to be popular, they’re going to be a bridge technology.

Marc Filippino
Peter, is there a scenario where hybrids become so popular that they make the transition to EVs harder?

Peter Campbell
So it is pretty clear that the destination where we are going is full decarbonisation, which is sometimes called net zero. That has been set out in government legislation and regulations. And now hybrids are a very effective way of reducing average emissions at an affordable price. But they don’t have zero emissions, and that is the problem. So people are expecting that everyone will have to sell EVs in order to meet the various emissions targets that are coming out. Whatever the future looks like, there are parts of the world where battery electric vehicles are not gonna be suitable because of the grid connection or particularly affordability at the moment. And Toyota’s argument is they are a global company — they serve Africa, they serve Latin America, they serve all sorts of places. And so electric vehicles, they say, will not be suitable for all of those. Now, time will tell. It could be that electric vehicles become the global ubiquitous option, but it certainly means that the future is going to be a lot messier, and a lot more convoluted, and a lot more nuanced than all the hype was telling us two or three years ago.

Marc Filippino
Peter Campbell is the FT’s global motor industry correspondent. Thanks, Peter.

Peter Campbell
Pleasure.

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Marc Filippino
A new season of F1 kicks off this weekend.

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Marc Filippino
The sport has arguably never been more popular, thanks to things like a gripping Netflix series and brand new races in the United States.

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Marc Filippino
It’s all part of a new strategy to create an entertainment juggernaut around the sport. Here to talk to me about that is the FT’s Sam Agini. Hey, Sam.

Sam Agini
Hi. It’s great to be here.

Marc Filippino
It’s good to have you. So, who or what is behind this new strategy in F1?

Sam Agini
Well, it kind of really goes back to this acquisition in 2017 — $8bn deal, Liberty Media. It’s a kind of media group controlled by John Malone, who made a fortune in telecoms and now has a bunch of entertainment assets like F1. Liberty really came in with the goal of: how do we increase the popularity of this sport? How do we make the fan base younger and not just, with respect, old guys with Rolexes?

Marc Filippino
And how do they do that? What are some of the things that they’re doing to try and get the popularity to expand beyond just old, white dudes with Rolexes, as you say?

Sam Agini
So, Liberty went ahead and did a deal with Netflix for a kind of behind-the-scenes series called Drive to Survive, which just about everybody’s watched now.

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Sam Agini
What this did was it kind of highlighted the personalities in the sport. You know, drivers usually wearing helmets, but now they got closer to the fans.

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Sam Agini
Then the pandemic hit. Live sport is nowhere, and Drive to Survive takes off. It’s hugely popular. Everyone goes crazy. Everyone’s talking about this sport.

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Sam Agini
And this means that F1, from facing existential crisis in the pandemic, they come out flying because there’s all this pent-up demand for live events, yes, but also their product. You know, they want to have every race be a Super Bowl. They don’t want it just to be about the races, all the events around the race, the build-up to the race, it’s about getting people excited about F1 well before race day.

Marc Filippino
Well, OK, so what else has Liberty done for the sport?

Sam Agini
Liberty has done a great job of extending F1’s reach. We’re preparing for a 24-race season. It’s the biggest in F1’s history. They’ve also turned that interest into more races in America. Liberty adds a race in Miami in 2022. Then they add Las Vegas in ‘23. And these things now they’re attracting, you know, hundreds of thousands of people over race weekend. But what’s really interesting is that a lot of these new fans coming into the sport, not only are they younger, they’re female, they’re girls and women. This is the next leg of this strategy. They’re trying to change the culture, not only of F1, but of motorsport, to get girls into karting much earlier. So they’re trying to grow this new F1 Academy, an all-female championship, to stoke some interest and actually put some money behind young female competitors and hone that talent. And what this does is it opens up the sport to a whole new crowd. And these demographics are just coveted by sports everywhere.

Marc Filippino
OK. The strategy is you create the entertainment spectacle, you put in the infrastructure to diversify the sport and then you expand the audience from there. How are other sports looking at what F1 is doing?

Sam Agini
You know, it’s a big live debate and sport. There’s a lot of envy about how F1 has become so much more popular, but we’re still waiting for proof that these new fans are gonna stick around. I think that sport is wrestling right now with this sports entertainment idea. F1 has introduced these short-format sprint races. There’s been some backlash there from purists who think this actually detracts from the main race. Liberty would say this is a competition that the casual viewer understands. It’s a shorter format race, and the viewing figures prove where we’re right. But also, people want experiences. People want to go and do things around a match. And I guess as long as you don’t compromise the sport itself, you can do a heck of a lot around it because people want to be as close as possible to the sport they love.

Marc Filippino
Sam Agini reports on the business of sport for the Financial Times. Thanks, Sam.

Sam Agini
It’s been a blast. Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Kasia Broussalian, Sonja Hudson, Fiona Symon and me, Marc Filippino. Our engineer is Monica Lopez. We had help this week from Zach St. Louis, Jess Smith, Michela Tindera, David da Silva, Michael Lello, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

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