Formula 1 teams are now required to operate within a budget of $145 million, this means the bigger constructors like Ferrari and Mercedes will have to reduce costs, the idea is to reduce the budget to $140 million for 2022 and dropping to $135 million for the following three years, this changes excludes driver salaries among other things.

Mercedes technical director, James Allison said:

“2021 is a big year for the entire sport. It’s the first year of the new financial regulations, the so-called cost cap”

“A set of regulations that forces the budgets of the big teams down to meet that of the midfield, and where we all basically have the same financial firepower to go about prosecuting the championship.”

“And that has been a very interesting change here inside Mercedes, because we are one of the bigger teams in Formula 1 and so we had to figure out how we can operate our championship assault with far less financial resource than we might have had previously.”

“This means figuring out how we can make components on our car to last longer, how to build them more cheaply and how to make sure we maintain the same sort of performance that we did previously, despite the fact that our overall budget has come down.”

“It’s [the financial regulations] a huge challenge and building the car is only part of it”

"Let’s hope that we’ve put enough goodness into the car at the beginning of the year, to allow our plans to unfold in a way that sees us operating at a high level under this new constraint, where we are fighting with exactly the same guns as everybody else”

Last season Mercedes won 13 out of 17 races as they claimed the Drivers' and Constructors' Championships for a seventh straight season. 

Mercedes is set to unveil his 2021 car, the W12, on March 2nd.