By Streisand Neto

LONDON, June 18 (Reuters) – Electric vehicle giant BYD is interested in getting involved with the Formula One motor racing circuit as it aims to boost its brand outside its home market of China, where it already has a strong foothold.

However, becoming F1’s first Chinese outfit ‌would be expensive and linking up with an existing team poses challenges, so a sponsorship-based approach might provide an easier pathway into the sport.

“Everyone wants ‌to be involved with F1,” said Ian Moore, a research analyst from Bernstein. “It’s because it’s the greatest marketing vehicle for OEMs (Original Equipment Manufacturers) that’s out there”.

Liberty Media-owned F1 already contains European and U.S. auto ​manufacturers like Ferrari, Mercedes-Benz, Ford Motor and General Motors’ Cadillac, who develop race engines or car bodies for teams.

FULL F1 ENTRY COSTS HUNDREDS OF MILLIONS OF DOLLARS

International Automobile Federation (FIA) President Mohammed Ben Sulayem and F1 are open to the idea of having a Chinese team, providing it brings commercial and sporting benefits for all.

BYD declined to comment on its goals in F1.

If it does decide to enter, there is space for one more team on the grid and BYD would have a strong commercial case to be ‌F1’s 12th competitor: it is the world’s largest EV maker ⁠by sales, China has its Shanghai Grand Prix and there are 221.1 million F1 fans in China, according to Formula One. By 2028, it aims to produce locally all the cars it sells in Europe.

However, if BYD decides to go down this path, ⁠it must clear several hurdles.

“From a financial point of view it might not sound like a wise move to spend so much money on a field they barely know,” Felipe Munoz, an independent analyst who runs the Car Industry Analysis platform, told Reuters.

Spending on infrastructure and a wind tunnel would be costly with no guarantee of success; for example, Aston Martin F1 ​team’s ​factory and campus in Silverstone, which includes a wind tunnel, is estimated to have cost ​between £150 million and £200 million, and the team have so far scored ‌one point this season.

A new team would likely need to pay more than $450 million in anti-dilution fees as Cadillac did to enter this year, since more teams impact income distribution.

Other options also pose challenges.

Buying into a team could be one way, with Alpine F1 team’s minority stakeholder Otro Capital looking to sell its 24% stake, but majority owners Renault are unwilling to cede control and must approve any deal.

Former Red Bull boss Christian Horner is looking to get back into the sport and has had some contact with BYD, but the Otro stake might suit his purposes better.

SPONSORSHIP OPTION COULD CAUSE CONFLICT

There could be opportunities, instead, for a branding-led approach.

“Entering F1 as a ‌sponsor only would be the lowest risk for BYD because it avoids the FIA regulatory ​requirements such as demonstrating technical and governance compliance requirements,” Nick De Marco, a sports law barrister for ​Blackstone Chambers, told Reuters.

BYD could potentially sponsor a midfield or back-of-the-pack team ​at a lower cost than a top-tier team like Oracle Red Bull Racing, where Oracle is paying $300 million over five years for ‌title branding.

For instance, software company Atlassian has a title partnership with ​nine-time constructors’ champion Williams worth between $40 million ​to $60 million a year.

Bernstein analysts estimated that the automotive category accounts for only 1% in annual F1 sponsorship value, while technology accounts for 14% and luxury accounts for 26%.

Formula One has no series-level auto partner like LVMH’s $100 million a year deal, where its multiple luxury brands feature across the sport.

“I’m not sure ​if that’s an option (for BYD) given that they’re also ‌an OEM,” Moore said, noting that a BYD sponsorship could possibly put it in conflict with existing auto manufacturers in F1.

De Marco, however, pointed ​out that a sponsorship approach would mean BYD not demonstrating its engineering and manufacturing abilities.

“I imagine (that) is the key benefit BYD would seek to ​derive from that participation”.

(Reporting by Streisand Neto; Editing by Alan Baldwin and Toby Chopra)