The 2004 Formula One (F1) season began in a rather predictable fashion with victories by world champion Michael Schumacher. But there is a new twist this year with the event for the first time featuring a race in China.
Shanghai has paid an undisclosed sum to the British promoter of F1, Bernie Ecclestone, to host one race at the city's new F1 circuit each year until 2010, beginning with a race this September. Both sides expect to reap significant rewards. The sport, traditionally centered on Europe, is keen to tap China's potentially huge market. Likewise, auto manufacturers behind the F1 teams are visiting China to stress their association with the sport. In March, Panasonic Toyota Racing became the first team in town when it started a month-long promotion campaign.
"The benefits for the winning car manufacturer in Shanghai will be significant because of the Chinese consumer preference for famous brands," said Alec Cheng, managing director of J. Walter Thompson in Beijing. It should also directly benefit component and fuel suppliers such as Shell and Bridgestone.
Sponsor companies are no less excited about the race. In March, Sinopec signed an agreement giving it the exclusive right to sponsor the Shanghai Grand Prix. China's largest oil company beat out competition that included HSBC, the principal sponsor of the Jaguar racing team. But HSBC still intends to do a considerable amount of promotional activity surrounding the event. "China is a powerfully important market for us," said Richard Beck, head of group external relations at HSBC's corporate affairs office in London.
The advertising industry is anticipating strong interest, because F1 attracts a much higher proportion of well-off viewers than other global sports events, making F1 attractive to luxury brand companies and financial services companies.
Bai Li, director of Shanghai TV's Greatsports Channel, which will transmit the event locally, said he expects the race to generate advertising revenues of about US$50 million, with key sectors being automobiles, financial services and petroleum products. Cheng said he anticipates that alcohol and tobacco advertisers will also be attracted.
The Shanghai circuit should help enliven a global sport that, to some, has become a little monotonous. Chris Aylett, chief executive of the UK-based Motorsport Industry Association, said the striking architecture of the course will allow Shanghai to make a very strong visual statement to the world. "An international television audience of 170 to 200 million will tune in to a very high-tech statement of China and Shanghai," he said.
Andy Moss, managing director of racing logistics and transport provider AWF in the UK, said Shanghai organizers were working to project local culture to an international audience. "With a few exceptions such as Monaco and Melbourne, the F1 scene currently looks a bit sterile, with most circuits appearing the same," Moss said.
Designed by German architect Herman Tilke, the nearly completed Shanghai track will be both modern and vast, capable of accommodating up to 200,000 fans. Local companies have invested about US$600 million in the project, which Aylett described as the "mother and father of all motor circuits."
More than 150,000 people are expected to watch the September race on-site. "The ticketing offices have been besieged," said Bai. "The F1 race will be the biggest single sports event China has ever hosted and one of Shanghai's largest investments."
Given its good transport infrastructure and ample resources, Shanghai should be able to handle the logistics of the event. Unlike most European cities, Moss said, Shanghai officials are able to take such measures as road closures to ensure the event passes off smoothly.
Bai estimated there would be about 5,000 (mostly foreign) television executives and crew covering the event. The experience can only benefit China's outside broadcasting expertise in the run up to 2008 Olympics. "F1 will help the Chinese television industry to understand more about international transmission technology standards," he said.
The circuit has been built on marshland in Anting, about 40km northwest of downtown Shanghai. Shanghai plans for it to become an integral part of developing the area into an auto manufacturing center. One of Volkswagen's joint venture plants is situated in Anting and, while it has no direct involvement in the sport, the German carmaker is strongly supportive of Shanghai's F1 plans. Ironically, Shanghai's other big foreign automaker, General Motors, is the only other major global player not to have a direct involvement in F1.
China's auto market is already one of the fastest growing in the world. Industry analysts expect the emergence of a car-buying public who do not simply buy a car for utility, but for pleasure and performance instead.
Mark Norcliffe, head of international trade at Britain's Society of Motor Manufacturers and Traders, said: "I'm sure the event will have some impact [on the auto industry] but not quite to the extent that some people think." Another executive in the auto sector, based in Shanghai, said the industry knows auto racing is coming to China and that they need to do something around it, "but don't seem to know how best to leverage it." Auto racing will have an effect, he adds, but at the moment there are more pressing issues such as how to make a profit in such a competitive market.
How much of a direct impact there will be on auto sales will depend on how quickly auto racing takes off in China. At the moment, interest is negligible. Local enthusiasts are still excited about their new passenger cars. Aylett said he believes F1 will catalyze auto racing just as hosting the World Cup boosted soccer's appeal in South Korea, adding that racing interest in China is as high as could be expected in a country that has seen almost no live racing. "It's very hard to experience motorsport without a circuit," he said.
"F1 in Shanghai is bound to trigger enthusiasm," he added. "Are there enough people in China with enough income to enjoy racing cars – I'm sure there are now. So far, the limit has been the circuit infrastructure."
With smaller tracks in Zhuhai and Beijing and two other tracks being planned, the priority is to stage more events, such as Formula 3000, touring cars, bikes and events that give wealthy individuals and corporate guests the opportunity to race cars. Such events should eventually lead to the nurturing of home-grown racing talent.
The emergence of a Chinese F1 winner – a Yao Ming on wheels – would have massive marketing implications.