London 2012’s legacy for F1- in China- Mark Gallagher

The first was the enormous appeal that the Oympic Games generates as a result of its inclusiveness. Whether it was a Jamaican sprinter, a home-grown cyclist, a slow rower from Niger or a first-time female competitor from Saudi Arabia, this was one big sporting party. A total of 204 countries competed, 85 won medals, and the top 20 included countries such as Iran and Kazakhstan.

Bernie Ecclestone has done a remarkable job of building Formula One into a sport which can, annually, deliver audiences that stand up pretty well to scrutiny against the quadrennial Olympic Games or World Cup.

Inclusiveness has never been a key mantra, however, for Formula One is built around a central pillar of elitism; in technology, in its self-regard and the opportunity for anyone who hopes to compete in it. Of this season’s 24 drivers, 15 come from five European countries, 4 from Latin America and two from Australia. All 12 teams are located in Europe, 8 in the UK. Furthermore, any aspiring driver who seeks to progress seamlessly from karting to Formula One had better have access to the £4m it takes to fund the lower formulae.

The elite spectacle of Formula One has led it to find a rich seam of revenues through global expansion in the past 15 years. With the creation of events in Malaysia, China, Bahrain, Singapore, Abu Dhabi, South Korea, and India the sport has made some progress in attracting drivers such as India’s Narain Karthikeyan and Karun Chandhok, but the principal benefit has been to open the coffers for investment into teams and events from sovereign and private funds.

What it hasn’t lead to is a diversification of competitors, important for Formula One’s development in countries and regions where a local hero will be needed to energise sponsors and media. And, this leads me to my second point.

China was once again a formidable competitor in the London Games, second in the medals table with 88 to the USA’s 104. Winning is everything to the Chinese, and much attention was paid by the media to a sporting culture where finishing second is regarded as being first of the losers.

Given the importance of sporting success to the world’s most populous country, it is puzzling to many that the nation which, since 2009, has been the world’s largest automobile producer has singularly ignored the business potential of Formula One.

In 2011, Ferrari sold 7195 cars world wide, a 9.5% increase in annual sales. In China, however, the Prancing Horse witnessed a 75% increase in sales year on year and is set to increase the number of dealerships from 10 to 15 by next year. Consider too that Bentley, a brand with strong motor sport heritage, sells 35% of its products in China.

The 5,200 cars that China produced in the whole of 1985 turned into 11.26 million passenger vehicles in 2010, 44% of which were from home-grown brands that few outside China have heard of. Hard to believe that anyone walks into the office and proudly throws down the keys to their new BYD, Lifan or Great Wall, but they do.

Formula One has tried hard to tap into this automotive mega-market mega. Ecclestone successfully secured a Chinese Grand Prix in 2004 in Shanghai, and this deal has recently been renewed until 2018. Team’s were initially ecstatic about China being added to the schedule, the belief being that Chinese companies, aka sponsors, would flock to Formula One. How wrong we were.

Lesson one was that Chinese companies had quite a big enough domestic market, thank you, without going to the expense of sponsoring a sport that few understood. Lesson two was that the commercial benefit went in the other direction; western brands using the presence of Formula One in China to push their wares in this important market.

There is some light at the end of the tunnel, and perhaps London 2012 pointed us towards it.

China’s car buying public are becoming more discerning, requiring style and performance, aspiring to own recognisable brands. As a proportion of total sales, domestic brands are struggling. With 114 million cars on the road and growing fast, there can be no better means of getting consumers onside than by combining the national passion for sporting success with the creation of home-grown talent that can win at the pinnacle of motoring competition.

The lesson for Formula One from this summer’s Games is perhaps that now is the time to explain to Chinese automotive brands the age old adage that if if you win on Sunday, you sell on on Monday. Even for the most hard bitten Chinese businessman, the opportunity to drive sales is one he understands.

About Mark Gallagher

Mark Gallagher is Managing Director of the CMS Motor Sport consultancy, co-owner of the Status Grand Prix motor racing team which competes in both Le Mans sports car racing and the GP3 feeder-series to Formula One, and an F1 commentator on ESPN Star Sports in Asia.  

He is also a professional conference speaker on the business lessons to be learned from Formula One, drawing on his experiences in senior management positions in the sport.

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