Why The Repsol Honda Partnership Is Not Going Away Any Time Soon

Marc Marquez on the Honda RC213V at the 2020 Qatar MotoGP Test - photo Polarity Photo

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.

Repsol's partnership with Honda infographic

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 decided to set a different course. They may feel, as rumors late last year suggested, that HRC were 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 are on the Spaniard for their 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.

The press release appears below:


Repsol and Honda to continue iconic partnership

The most recognized partnership in racing is set to continue for a further two years as the Spanish energy company and the Japanese manufacturer extend their successful relationship.

Few could have imagined that in 1995 the most recognizable colours in the MotoGP World Championship would be born and achieve unrivalled successful more than 25 years later with 180 premier class wins and 15 Rider World Championships, cementing the Repsol Honda Team as the reference in Grand Prix motorcycle racing. More than half of the premier class world titles won since 1995 have gone to the Repsol Honda Team. In addition, the Repsol-Honda collaboration has led to 10 Team Championships since the award was created in 2002. A record of 180 wins and 447 podiums in 500cc and MotoGP.

A close working relationship between the Repsol Technology Centre, which is located in Móstoles (Spain), and HRC laboratories in Saitama (Japan) has produced a winning formula based around the bike, rider, fuel and lubricants working in harmony. This long-term cooperation is an example of the enduring collaboration between two global companies that always seek to overcome challenges and aspire to excellence. Repsol and Honda have been able to make the most of their strengths and achieve a winning formula, which is based on the combination of bike, rider, fuel and lubricant.

Yoshishige Nomura
HRC President

“It is always a great feeling to extend our partnership with Repsol, this time for a further two years. Together we have achieved incredible success and formed a partnership which is unique in motorsport. Working as one we have, and will continue, to overcome all obstacles and hardships which are presented to us. 2020 has been a difficult year for the world, but together with Repsol we have continued to work towards our goals. We are now looking forward to continuing this journey together and writing many more pages in the history of Grand Prix racing.”

Begoña Elices García
Repsol's Executive Managing Director of Communications and the Chairman’s Office

“The renewal of this agreement with a partner as important to Repsol as Honda in MotoGP is proof of the strength of our alliance, especially in the current international climate caused by the coronavirus pandemic. For Repsol, the technological factor is key and this historic association has provided a lot of innovation and collaboration. Together we have achieved great sporting goals and we have also made our products evolve towards excellence. Continuing to advance along this successful path, always at the service of society, is what drives us to continue to improve day after day.”


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Comments

As I always believed they signed contracts longer than two years? The company I worked for in the UK motorcycle trade just before the turn of the century was persuaded to take Repsol motorcycle lubricants to trial the market. We already distributed a popular established brand, but with Mick Doohan well into his five year reign, and with a few promo freebies in my car, I for one was a happy bunny. In a nutshell, it wasn't a success because even though the brand association and colours were recognisable by the trade, most people thought Repsol were just another cigarette brand, or bank or similar. The first wave of stock was all in Spanish, which didn't help, but the connection was never made. Sometimes brand names, colours, devices etc can all be seen as familiar to the consumer, but unless marketing makes the connection between the sizzle and the sausage, even big hitters can fail. 

Having spent my life in the auto & motorcycle trades as well, I concur. Serious fans of a particular motorsport displine will make the connections but not the average consumer. Also while I of course know to associate Phillip Morris with Ducati, when thinking of "Marlboro" cigarettes, that's going to be white & (dayglow)red/orange on a Penske, McLaren or Yamaha! 

Sorry Bologna. ;) 

And in UK too - it was only when I started visiting Spain did I discover them. Up to that point I had this misguided idea that they were a sun screen manufacturer! 

Whereas I thought they were a Spanish pharma making something for an uncomfortable complaint in the nether regions.

Most of the sponsors in MotoGP are completely unknown in Australia but we are a tiny market compared to Europe and South East Asia.

On a per-capita basis, Australia is actually a surprisingly important market to all of the manufacturers. For a while we were Ducati's largest market outside of Italy.