The Formula 1 Fiasco in India

You must be scratching your head wondering what fiasco is this guy talking about? Sebastian Vettel just rocked the Formula 1 (F1) circuit in India to take his 4th World Driver’s Championship. Everything went as planned at the Indian Buddh International Circuit (BIC) except it could potentially be the last F1 race at the track. The Indian F1 race has taken place only 3 times (2011-2013) and already it’s getting nixed from the schedule. Of course, the F1 party line is that it’s taking a break from the Indian race in 2014 and then returning in 2015…right. That’s the equivalent of a CEO saying he’s stepping down to spend more time with his family, when in fact he probably got canned.

So what gives? More then likely government bureaucracy caused the rift between the Indian government and the F1. As usual, the average Indian government official pushes around it’s citizens because those citizens have no choice but to deal with it. Unfortunately, there is slight problem when Indian government officials push around foreign investors who can choose ANY other country to do business in. I would not be surprised if the Indian government or the local authorities were asking for larger bribes and being a general pain in the ass for Bernie Ecclestone (the owner of the F1 race) who probably decided to pull the plug on India then deal with government bureaucracy.

In 2014, there will be 22 races on the F1 schedule. The Indian race is a small percentage of the overall business so Bernie can tangle with the Indian authorities and not really loose any sleep. The guys that will lose sleep are the Indian owners of the BIC – the Jaypee Group. The Jaypee Group is politically connected and will undoubtedly throw their weight around in Delhi to make sure their hugh investment in the F1 partnership and track doesn’t get flushed down the toilet. It’s all classic negotiating 101 and part of doing business in an emerging market like India.

The F1 pulling out of India is a script that is so normal for doing business in India – setup shop in India and after a couple of years the local government officials realize they should “tax” the business even further. It’s no wonder that retail giants like Wal-Mart, IKEA and Tesco are yet to enter India even though they have been given the green light to setup shop.