Back in early May, NASCAR unveiled its long-anticipated Next-Gen car, set to debut in 2022. For race fans, the new car brings hopes of tighter racing on the track (in theory it eliminates the ability for any one team to dominate because of the resources at their disposal). But for team owners—and prospective team owners—it is the prospect of cost containment and expense certainty that has drawn their attention. Many of the most costly parts—things that were not adding to the sport’s entertainment value or the quality of racing (think: chassis, body)—will be standardized in the Next-Gen car. As a result, Torrey Galida (president, Richard Childress Racing) said he has been hearing “more interest, more buzz” surrounding NASCAR charters within the garage over the last month or so.
Our Take: Interest in Cup team ownership is finally starting to bubble up the way the sport’s leadership envisioned when it introduced the charter system back in 2016 (think: right to run the car in each race). NASCAR VP of Strategic Development Scott Prime said the sanctioning body is “very encouraged by the growing demand for charters in the NASCAR Cup Series. It’s reflective of the massive effort underway to create a more effective business model, making team ownership an even more attractive proposition for potential owners.”
The pro sports teams that continue to see their values escalate participate in leagues with long-term labor pacts in place. Mike Burch (chief strategy officer, Speedway Motorsports) views the rollout of the Next-Gen car “kind of analogous to the collective bargaining agreements that exist [in leagues like the NFL and NBA],” he said. “If [an owner] has a sense of what it will cost them to be competitive on the car side, [they] can budget out more predictably.”
The introduction of NASCAR’s charter system has helped team owners flatten out fluctuations on the revenue side. “It used to be that the majority of the revenue [teams made] from competition came from where [they] placed,” Burch said. “But charter distributions provide teams with a guaranteed revenue stream and have reduced the percentage of the purse that is up for grabs each week. So, there’s a little more predictability in expenses and revenues.”
In addition to the predictability gained, the Next-Gen car should result in meaningful cost savings. “Teams are [naturally] going to compete on everything. They’ll spend one more dollar [than the next team] to get 1/1000 of a second faster,” Burch said. So, by standardizing some of the less glamorous car parts, NASCAR will reduce the cost of racing and save competitive team owners from themselves. It should be noted the real savings may not occur until year two, as race teams will need to buy new cars for next season.
While the rollout of the Next-Gen car is no doubt the catalyst for the rising interest in NASCAR charters, the sport has also enjoyed several positive developments over the last year. Its television ratings held up comparatively well during the pandemic, and a pair of high-profile investors bought into teams (see: Michael Jordan and Pitbull). “If you’re bullish on the next round of rights fees going up, then you see this is a great time to get in [to the sport] and have a chance to be both competitive and profitable,” Burch said.
Octagon media rights consultant Dan Cohen made it sound as if NASCAR will see an increase in the next media rights deal. “NASCAR has a diehard fan base that drives millions of viewers to NBC and FOX week in and week out,” he said. “They have also made tremendous strides in improving the race day and broadcast product. It remains a Tier 1 sports property, and in today’s arms race for linear retention and SVOD sub growth, media companies will be lined up to acquire NASCAR’s next cycle of media rights.”
Only 36 NASCAR Cup Series charters exist, and unless another manufacturer enters the sport, no additional seats will be added to the proverbial table. So, any current or prospective team owner looking to get their hands on one will have to buy (or lease) it from an existing team. Those looking will find the asking price has risen since Jordan and Hamlin found a charter in the middle seven figures. As Burch said, “Demand of a scarce resource always drives up the price.” Galida suggested the asking price is “definitely now getting up into the $10 million-plus range.”
It’s been rumored that Michael Jordan, Denny Hamlin and the 23XI team are looking to add a second car. Dale Earnhardt Jr. has said he and his sister Kelly have discussed securing a charter and moving up to the Cup level. And driver Brad Keselowski is believed to be exploring an ownership opportunity with Roush Fenway Racing. While those are the highest profile potential buyers, Trackhouse Racing (which is currently leasing a charter and looking to secure its long-term future), Kaulig Racing (also leasing for the ’21 season) and JTG Daugherty Racing (running Ryan Preece’s team without a charter) are all potentially in the market too. “There are several people [including some not currently in the sport] interested in establishing teams, and the only way to really do that effectively [from an investment standpoint] is to have one of the 36 charters,” Galida said.
It does need be noted that while there is a lot of interest in NASCAR charters, none has been sold since the details of the Next-Gen car were released.
A bet on the Next-Gen car isn’t without risk. Back in 2007 NASCAR introduced the “Car of Tomorrow” that also touted a centralized template to lower costs (particularly for teams that competed in both the Xfininty and Cup Series). And as Chris Lencheski, who owned a team at the time, reminded, the fans simply hated it from the jump—largely because of the way it looked—and “it cost [ownership] at least two times the amount of money than was suggested when the idea was first presented.” The Car of Tomorrow was phased out after just five-and-a-half seasons.
From an optics perspective, race fans should not have a problem with the Next-Gen car. “It looks like a newer version of a NASCAR car, as opposed to something completely unseen before. The Car of Tomorrow had rear wings!” Lencheski exclaimed.