Lewis Hamilton of the United Kingdom drives the (44) Mercedes-AMG Petronas F1 Team F1 W15 E Performance Mercedes during the Formula 1 Grand Prix of Monaco in Monte Carlo, Monaco, on May 26, 2024.
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If you wanted to see the future of the automotive industry, the Formula One rulebook was often a good place to start.
Regulations that made seat belts and crouch zones mandatory in racing cars quickly led to their adoption in road vehicles, while KERS (kinetic energy recovery) systems developed by teams to capture and convert energy lost during braking made hybrid cars, buses and taxis lighter. And more efficient.
But the sport's new regulations suggest that carmakers are not pinning all their hopes on electric cars. In 2026, Formula 1 cars will be powered by hybrid engines with a 50:50 split between electric power and internal combustion; Most importantly, the combustion engine will be powered by synthetic e-fuels.
“We want to address climate change, and here (synthetic fuels) is a way to do that,” former Formula 1 technical director Pat Symonds told CNBC while still at the organisation.
“It's different from electricity, and since we started this project several years ago, more people are realizing that there is a parallel path to decarbonizing transportation.”
One of those shifting strategies is Honda, which has announced it will return to Formula One in 2026 after leaving the sport in 2021 to “strive for carbon neutrality by 2050.” Another company is Audi, which left Formula E in 2021 to join Formula 1 in 2026, the same year in which the German car company will stop producing new cars with a combustion engine and launch only electric cars.
On the face of it, investing large sums of money in developing a Formula 1 engine that will never transition to road cars seems contradictory, but some believe Formula 1's automotive partners are hedging their bets on electric cars. “No company follows a linear path to sustainability,” Madeleine Orr, an assistant professor of sports ecology at the University of Toronto, told CNBC. “If Audi is looking for R&D it needs to increase certain products, and Formula 1 is a great way to do that.”
One product that Audi is ramping up is synthetic e-fuel, which uses renewablely generated electricity to split water into hydrogen and oxygen before combining them with carbon dioxide. Currently, e-fuel is too expensive for most road users, but producers point out that it is a cleaner alternative for industries where electricity is difficult to obtain such as aviation and shipping.
This is seen by some as a Trojan horse to hinder the electrification of road vehicles.
“E-fuel production is a much less efficient use of renewable energy than operating an electric vehicle,” said Alex Caines, director of automotive policy at the Transport and Climate Environment Group.
“These fuels are essential for decarbonizing industries that you can't easily electrify, but they are a vastly inefficient use of renewable energy in cars compared to battery power.”
A crowded pit lane during the Formula 1 Crypto.com Miami Grand Prix 2024 in Miami, USA, on May 1, 2024. (Photo by Alessio Morges/Noor Photo via Getty Images)
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Without denying the engineering arguments for electrification, e-fuel proponents counter that this ignores economic realities. “The world doesn’t run on efficiency, it runs on markets and ultimately on price,” Paddy Lowe, a veteran Formula 1 engineer and founder of e-fuel company Zero, told CNBC. “When I plug in an electric car, I'm using the most expensive electricity in the world in terms of infrastructure requirements; not everyone can afford that,” he said.
Car buyers seem to agree. Electric vehicle sales in the US were flat in the first quarter while sales in Europe fell year-on-year by 5.2% in March as inflation dampened sector growth. This may be just a minor point for electrification, but it has forced some manufacturers to pause their plans with Ford delaying the launch of its new electric SUV until 2027.
The possibility of lawmakers adopting increasingly isolationist policies will also weigh on the minds of manufacturers. US presidential candidate Donald Trump has threatened to eliminate environmental subsidies and impose 100% import tariffs on electric vehicles if he returns to office. Meanwhile, Germany's Free Democratic Party has blocked the EU-wide phase-out of cars using internal combustion engines (ICE) after 2035, demanding an amendment that would allow cars powered by e-fuel. “We in Germany have mastered combustion engine technology better than anyone else in the world,” the FDP's transport minister said after the bloc's release. “It makes sense to hold this technology in our hands while some questions about climate-neutral mobility remain unanswered.”
But not all German car manufacturers supported this bloc. In mid-2023, Mercedes CEO Ola Källenius confirmed the company's plans to prioritize the development of electric vehicles, noting that e-fuels cannot compete with electric vehicles in terms of emissions.
This put the German manufacturer at odds with F1. In early 2023, it is understood that senior representatives of the sport met with politicians in Brussels to explain the benefits of e-fuel, and even wrote to the office of Frans Timmermans, the then EU vice-president and climate action commissioner, to oppose a ban on e-fuel. “combustion engines” in favor of electric vehicles, calling it “a huge one-way bet on a relatively new technology.”
When asked about the motivation behind the meetings, Liam Parker, Formula 1's chief relations and communications officer, told CNBC: “The aim was to explain our solution to decarbonise road vehicles and continue to show that Formula 1 matters in the automotive sector.”
But some critics hinted at more sinister motives. “Given that most automakers are committed to electrification anyway, the only sectors that benefit from e-fuel retrofitting are oil and gas, because it protects their old oil refining interests,” Keynes said. In 2020, Formula 1 signed a sponsorship agreement with Saudi Aramco worth $45 million annually which stipulated that the partnership would work to “develop sustainable fuels”.
F1 CEO Stefano Domenicali denied accusations that F1 was acting on behalf of Aramco when leveled at him by CNBC. He said, “We are not putting pressure on anyone. We are thinking about a better future for everyone. It is a very complex topic and we have to be wiser than many people who speak without knowing the complexity of this transformation.” “
Regardless of its impact on the road, Domenicali is clear that sustainable fuel will play a big role in the future of his sport. “Formula 1 has always been seen as having the lighter, better cars, so if sustainable fuel works, we could return to a situation where the battery is no longer needed,” he said.
Correction: This story has been updated with the correct spelling of Stefano Domenicali's name.
