“I think that some of the prices I’ve seen are way high. To do an initial aero kit, for me, in terms of my costs; keep in mind we’re sitting on the coast overlooking the Pacific Ocean so our costs might be higher than some, but I don’t see it costing me more than $750,000 to a million to do the initial kit. That would include a reasonable amount of CFD time to get it close, and then to build a wind tunnel model to refine the kit.
“It might be a little bit more – closer to a million with all the tooling and labor – but the costs aren’t as bad as maybe some first thought they’d be. You’re looking at the costs of a wind tunnel model and all the different pieces you want to test, probably about 300 hours of aerodynamic testing time, and maybe a few hundred hours of shop labor time to get that first kit into the hands of IndyCar teams.”
It’s worth mentioning that if Swift made a kit for 2012, and then came up with a new and improved design for 2013, the costs would still be significant, if not almost identical to that of their first kit. New wind tunnel model pieces would be required, along with hundreds of new hours of CFD/wind tunnel testing, the production of new bodywork molds and all of the labor required to bring everything to life.
If a company only makes slight alterations – maybe just a revised engine cover – the costs are much lower, but they aren’t completely insignificant.
Swift Engineering's Jan Refsdal poses with a wind tunnel model of the Swift 009 CART chassis. (Swift Engineering)
To get started for 2012, though, Refsdal reiterated that in the current economy, it would be hard to imagine any aero kit constructor putting out their own funds to do the upfront development.
“If we, Swift Engineering, have to invest that million dollars, it makes no sense because we have no way to recoup that investment. If I’m going to invest a million dollars to build an aero kit without knowing how many I’d sell, that would be too risky for me. It would be a challenge for just about everybody these days. If we can sign a contract to produce an aero kit for a car company or an IndyCar team, the cost of producing the bodywork itself actually makes a lot of sense for us. We can make a profit doing that, provided the R&D expenses are covered. At that point, it’s just materials and labor for us. If you can get the economics to that point, it’s a good deal.”
One of the suggestions for Tony Cotman that Refsdal repeated many times was for the IZOD IndyCar series to implement some form of cost or development cap on aero kits. Without said restrictions, Refsdal fears the wealthier aero kit sponsors could push the development costs closer to Purnell’s ceiling of 10 million dollars.
“The bigger issue isn’t the costs to make a sidepod or an engine cover, it’s what kind of limits will be placed on developing these kits. What’s to stop someone from spending umpteen thousands of hours in the wind tunnel? You can reasonably expect to make a profit on what [the IndyCar Series] put out there for sale prices assuming someone pays you for the upfront development costs, but if someone can spend whatever they want on the development, the upfront costs go up, and that pushes a lot of people out of the picture. If they write the rules to keep the development costs sane, I can see it being a lot easier to find a willing partner to pay for companies like ours to make aero kits.”
Refsdal’s point that R&D costs need to be covered by a client shouldn’t be taken lightly.
Granted, until the rules are written to prevent such a thing from happening, someone could flood a company like Swift, Lola, DeltaWing or even Dallara with marketing dollars to build an aero kit with no expectation of making a profit. It’s unlikely, but someone like Lotus could allocate a lot of money to have aero kits made, writing the costs off as nothing more than a marketing expense. We’ve yet to see those kinds of angel investors come to play in the IZOD IndyCar Series, but the possibility does exist.
The most likely scenario has whoever pays to have an aero kit produced looking at the endeavor with a critical eye, expecting to eventually turn a profit on their investment.
If you hate math, the next bit might not be so much fun, but it’s just the kind of cost benefit analysis work that potential aero kit manufacturers would evaluate.
While the complete costs to bring an aero kit to market differ greatly, the costs to manufacture the bodywork itself should be just about the same for every constructor. Based on my conversation with Swift and a few other bodywork specialists, the general production costs for an aero kit is somewhere between $30,000 to $35,000, offering constructors the opportunity to make a profit of 100 percent or more on every kit they sell.
Aero kits will be sold at a maximum of $70,000 a piece. Let’s say half of that, $35,000, is profit.
Tony Cotman, the 2012 car chief, will have a lot of work to do in order to make the manufacturing an aero kit a reasonable expense. (IndyCar.com)
Let’s also assume there are 24 cars on the 2012 grid. Based on my estimations, that figure might be high, but let’s use it nonetheless. Most teams will purchase a backup car for each entry, pushing the total 2012 chassis sold by Dallara to 48. That number will also be lower, but humor me.
If an aero kit costs one million dollars to get to market, a constructor will need to sell 29 kits to break even. That constructor would have to have about half of the grid buying their kit to hit that number.
Move the costs to two million dollars, and 57 kits need to be sold to break even. With 48 potential chassis to fit with body kits, total market domination (and then some) would be required.
Get into the three or four million dollar development range, and there’s no hope of ever selling enough kits to make back the R&D investment. Crashes and the subsequent replacement bodywork pieces would account for more kit sales, but it would still be impossible to factor those additional sales figures into an exact sales forecast.
The numbers tell us that keeping the development costs to something below two million dollars makes the most business sense for constructors and for the series.
Provided the rules are written to keep aero kit development from getting out of hand, and using Swift as a case study, it’s possible to imagine having more than Dallara aero kits on offer in 2012.
The critical piece in the equation is to have the upfront R&D costs covered. If that’s done, becoming an aero kit manufacturer has a financial upside. That, in my opinion, is how the IZOD IndyCar Series gets two or three aero kits onto the market. Keep the costs low enough to entice an Andretti Autosport or a Panther Racing to have a kit made that won't end up being a total financial loss, and maybe the series gains some momentum on an idea that has yet to take off.
If the rules are left open and someone can burn five million dollars or more on an aero kit – about the same as Cosworth
estimates a 2012 engine to cost – I’m afraid Dallara might be the only player in the aero game.
Policing CFD and wind tunnel time limits would be a challenge (although it has been done in other forms of motorsport), but if Tony Cotman writes reasonable aero boundaries into the rules, and also establishes some minimum length of time before a constructor can update an aero kit – maybe two years – then production costs are maintained while creating a larger window for constructors to sell their kits.
Making kit production costs and purchases a biennial affair helps everyone involved with the series, and provided they pen the aero kit rules to favor the average constructors and teams with average budgets, maybe the IZOD IndyCar Series will gain some traction on their unique 2012 aero kit plans.
Read SPEED.com's extensive coverage of the 2012 IndyCar:
Tony Cotman 2012 Q&A
Cosworth 2012 Q&A
Honda 2012 Q&A
2012 Car Reactions
2012 Car Has Manufacturers Listening
PRUETT: ICONIC Thud Or Thunder?
Randy Bernard 2012 Q&A
PRUETT: 2012
Marshall Pruett is SPEED.com’s Auto Racing Editor, and also covers IndyCar and sportscar racing for the site. Pruett grew up at ‘Pruett's Olde English Garage,’ his father's shelter for abused foreign cars, and spent his childhood being dragged across the West Coast to help with his dad's amateur racing exploits.
Pruett spent 20 years working in the IRL, CART, IMSA, and most of the known open-wheel feeder series before retiring from active duty in 2001. And in case you were wondering, he isn’t related to Scott Pruett.
Marshall lives in Northern California with his wife Shabral, and can be emailed . He can also be harassed on Twitter .
