For the past couple of months, rumors have been doing the rounds that Spanish oil giant Repsol was about to withdraw its sponsorship of the factory Honda squad, and Red Bull would step in to take over as title sponsor.
There were plenty of reasons to give credence to the rumors. The global Covid-19 pandemic has caused the oil price to plummet: the price of a barrel of Brent Crude went from nearly $70 a barrel in February to under $20 a barrel in April, though it has since recovered to just over $40 a barrel.
That is still roughly 33% lower than it has been for the past couple of years.
That has had a massive impact on Repsol’s share price. In November 2019, Repsol shares were at over €15. They have since cratered, and currently stand at around €5.90.
Earnings had taken a massive hit too. Profits (or more accurately, EBITDA) were €3.7 billion in the first half of 2019. That had fallen to €589 million in the first half of 2020. And the first half of 2020 included January and February, before the impact of the Covid-19 crisis really hit.
Then there was Red Bull. The Austrian energy drinks giant had steadily been strengthening its partnership with Honda. They had previously been title sponsor to the Honda WorldSBK team, and Honda provided the engines for the Red Bull F1 team.
Red Bull had made no secret of their interest in increasing their sponsorship of the factory Honda team, especially as Marc Márquez has long been a Red Bull athlete, and he is to be joined next year by Pol Espargaro, who has just spent the past four seasons at the Red Bull KTM Factory team.
Would Repsol drop its Honda sponsorship, and leave the field clear for Red Bull? There was growing momentum inside the paddock for the notion that this might actually happen.
It didn’t, of course. Today, Repsol and Honda announced they had extended their relationship for two more seasons, with Repsol remaining as title sponsor for the 2021 and 2022 seasons.
The renewal was almost inevitable, for a number of reasons.
Repsol has been title sponsor to the factory Honda team for 26 years now, and has become almost synonymous with the Japanese manufacturer.
The two brands are so heavily interwoven in MotoGP that separating them out has become almost impossible. They have won 15 titles in those 26 years, stamping an indelible mark on the championship.
The length of that association has made it almost impossible for Repsol to leave Honda and remain in MotoGP, or even any form of motorcycle racing.
The association between Repsol and Honda is so firmly fixed in the minds of motorcycle racing fans that it is almost impossible to think of one without thinking of the other.
On the one hand, this is extremely mutually beneficial, for both Honda and Repsol. Fans driving by a Repsol filling station will immediately think of Honda; fans seeing a Honda CBR1000RR in a showroom will automatically think of Repsol.
That is the core function of sponsorship and marketing, to reinforce positive associations for the brands involved.
But it also creates a dilemma. Because Repsol and Honda are so closely linked, the value of Repsol switching to Ducati or Yamaha, for example is reduced. Fans would for many years still think of Honda when they saw a Repsol Yamaha.
Likewise, fans will still think of Repsol were Red Bull to step in as title sponsor for Honda. Fans, journalists, and commentators would spend a long time accidentally saying “Repsol Honda”, then having to clarify.
That would be bad for Repsol and Honda, and bad for their respective new partners.
This is a conversation I have had with bosses of other factories in the past. They have pointed to Ducati and Philip Morris as an example: Philip Morris cannot move to another team, because Marlboro is still so strongly linked to the Ducatis, through years of sponsorship.
The benefit of establishing long-term relationships is that the effectiveness of the marketing grows stronger over time. But it also means that it gets harder to break those bonds.
The only way that Repsol would leave Honda would be if they were to pull out of MotoGP sponsorship altogether. That is always a possibility, but the current economic crisis was never going to be a justification for pulling out of sponsorship.
The amount Repsol spends on sponsoring the factory Honda MotoGP team is rumored to be in the region of €10 million a season.
With a turnover in the region of €50 billion, and profits, even in a bad year of several hundred million euros, the amount spent on sponsoring the Honda MotoGP team is not much more than a rounding error.
And given the popularity of MotoGP in Repsol’s key markets in Spain and South America, the exposure they get for that money vastly outweighs the cost.
Of course, Honda might also decide to set a different course. They may feel, as rumors late last year suggested, that HRC was wary of the growing Spanish influence inside their MotoGP team.
With Repsol providing the money, the race team based in Spain, and Marc Márquez (understandably) exerting sizable influence over the team and the MotoGP program, Honda may be tempted to seize back control. That would start by seeking an alternative for Repsol.
But that would be a very radical step. And with Marc Márquez’ absence proving once again just how dependent HRC is on the Spaniard for its success, it would risk pushing Márquez out and losing him to a rival factory. That does not seem like a wise strategy at all.
And so Repsol and Honda continue their partnership, for another two years at least. And in twelve or eighteen months, rumors will once again emerge of an imminent split between the Spanish oil giant and the Japanese manufacturer.
And in all likelihood, they will sign another contract to stay together even longer.
There have been rumors of a Repsol/Honda split for almost as long as I have been in the paddock. It is yet to happen. And I am not holding my breath.
Source: Repsol; Photo: Repsol Honda