Formula 1 is approaching an agreement on a new engine concept from 2026 – and it is becoming more and more likely that at least one Volkswagen Group brand will be seduced by its introduction.

They are a simplification of hybrid powertrains, level the playing field for a new entrant to compete with others who have been in sport for decades, and commit to using sustainable fuels.

The VW Group has been involved in discussions about the new engine formula in recent months, and high-ranking F1 insiders are increasingly certain that at least one VW brand – mostly likely Audi or Porsche – will join in 2026.

From the perspective of Formula 1, this would be a vote of confidence from the world’s second largest car company in a direction of travel that is based on the premise that electrical energy is not the only answer to a sustainable future for motorized transport.

Talks are still ongoing, but broad agreement has been reached on the future, with minor details yet to be clarified.

What is changing in the engines?

The main difference between the engines that F1 will use from 2026 and the current ones will be the removal of a device called the MGU-H.

This is the part of the hybrid system that recovers energy from the turbocharger. It is at the heart of the revolutionary efficiency that F1 engines can achieve, but it has some key drawbacks – it is incredibly complex and expensive to perfect, and it has not been found to be relevant for use in standard road vehicle engines.

VW has made it clear that it will not get into Formula 1 if the engines kept the MGU-H, as it would have been almost impossible for them to draw on the know-how built up over the past seven years by Ferrari’s current Formula 1 suppliers come up to Honda, Mercedes and Renault.

Eliminating the MGU-H was not an easy sale to a group of large auto companies that had invested many millions in perfecting it, and especially not to Mercedes, who have dominated F1 since the introduction of these hybrids in 2014. But now everyone agrees – with reservations.

First, the engines remain hybrids. They will maintain a similar level of performance to the existing engines by greatly increasing the performance of the other part of the hybrid system, the MGU-K, which recovers energy from the rear axle.

This helps secure the main goals of the new engine formula – that the engines are both simpler and significantly cheaper.

What other discussion points are there?

Since the MGU-H is central to the operation of current F1 engines, in order to get rid of it effectively, all manufacturers must develop brand new engines.

But if a change is accepted, which is a prerequisite for VW’s entry into Formula 1, the existing manufacturers are only willing to go that far.

Part of the new rules for engines from 2026 will be a budget cap and other constraints on development. It had been suggested that every new manufacturer – for example a VW brand – be given a head start by allowing them higher spending and / or development either when preparing for entry or when starting Formula 1 for the first time.

But the previous manufacturers – above all Ferrari – have refused to accept this. Negotiations are ongoing, but since Ferrari said no, it is unlikely that this will be agreed.

Another point of contention is Red Bull. They are establishing themselves as an independent engine manufacturer after partner Honda decided to leave Formula 1 at the end of this season. Starting next year, Red Bull will be running its existing Honda engine design, but serviced by its own brand new factory.

The other manufacturers have obvious concerns about a possible link between Red Bull and VW, and there are arguments as to whether Red Bull should be considered as an existing or a new manufacturer under the new rules – which has both financial and sporting benefits being discussed .

Agreement on these and other details has not yet been reached. And getting there requires compromises. But the sport should be “in a good place” and the talks are going in the right direction.

Another clue to VW’s involvement in Formula 1 could come from an unusual direction – the latest race to be added to the calendar.

Qatar’s new deal with Formula 1 for a race in November and then a 10-year deal from 2023 is the largest the sport has ever done with a race organizer. In other words, the Gulf state’s commitment to Formula 1 is reflected in the fact that it pays more money for its race than anyone else.

By the way, Qatar also holds 14.6% of the shares in the VW Group.

What are these sustainable fuels?

Adopting sustainable fuels is an important part of a strategy for all of F1 to be carbon-free by 2030.

The sport took a small step in that direction this year with the introduction of so-called E10 fuels, 10% of which are made from biofuels, as did the new fuel that launched in UK garages this summer.

But the plans for 2026 are far more ambitious. You’re supposed to introduce a fully sustainable fuel that Formula 1 claims is net-zero carbon-free.

There are essentially two approaches: fuels made from biomass and so-called synthetic e-fuels.

Both are “drop-in” replacements for traditional fossil fuels in an internal combustion engine. But at a time when the world is trying to cut its CO2 emissions, they both have a similar problem – just like regular gasoline, they release CO2 into the atmosphere.

The main requirement for their sustainability, however, is that they cause greatly reduced CO2 emissions over the life cycle of the fuel.

What is the difference between them

One is made from biomass – for example from raw materials, waste oil from animals or plants and other organic waste from households or companies. This is considered climate neutral, as the product emits the same amount of carbon when burned as its source absorbed when growing.

Synthetic e-fuels are produced in an industrial process in which CO2 is captured from the atmosphere and combined with hydrogen to make fuel. In this case, the CO2 produced when the fuel was burned is the same gas that was taken directly from the atmosphere to make it.

The big disadvantage with synthetic fuels is that they require a lot of energy to produce. And if this energy does not come from sustainable sources, the fuel is no longer very “green”.

F1’s current position is that it doesn’t know what type of sustainable fuel it will be using from 2026, in part because its fuel suppliers themselves are divided on which route they consider optimal to be on.

The hope is that the competition between fuel suppliers for the most environmentally friendly gasoline substitute will determine which direction Formula 1 takes.

Meanwhile, a new plant for the production of synthetic e-fuel is being built in the south of Chile, north of the port of Punta Arenas. Among the companies that are investing in it? VW’s own Porsche.

Why the urge for sustainable fuel?

At a time when the road car market is increasingly moving towards electrification, you might be wondering why Formula 1 isn’t just going electric and why all these car companies are interested in pushing for a replacement for gasoline, which is still CO2 produced?

The answer is that it is not currently possible to have an electrically powered car with F1 performance levels – the technology is simply not advanced enough. The same applies to other means of transport.

The central issue is energy density. Batteries just don’t have enough of it when compared to fossil fuels. For example, a commercial aircraft to Australia powered by a battery with sufficient capacity would be many times too heavy to take off.

So it will be many years before batteries are used for passenger planes or ocean-going ships or combine harvesters, etc.

At the same time, while some Western governments are phasing out gasoline and diesel powered cars through sales bans within a few years, millions of internal combustion engine cars are likely to be on the world’s roads for decades to come.

The hope is that sustainable fuels could offer a way to drastically reduce the CO2 emissions from them.

What is longer term?

Formula 1’s move to sustainable fuels makes sense in many ways – it cuts emissions and, as a symbol, also helps secure the future of sport in a world where reducing CO2 emissions is of vital importance, if humanity is trying to cope with the climate crisis.

It offers Formula 1 the opportunity to maintain the level of performance that is required to generate the “wow” factor that is so crucial to its attractiveness, while at the same time taking environmental aspects seriously.

But it’s not a long-term solution. It’s a stepping stone to a more sustainable, truly carbon-free future as the automotive industry and the whole world are closer to figuring out what that future looks like.

Are these solid-state batteries? Is it, as some high-profile figures in sport have suggested, with hydrogen fuel cells, that only give off water? Or some other technology that hasn’t appeared on the horizon yet?

Nobody knows yet, but there are already rumors that the next engine formula to be introduced in the early 2030s could be based on hydrogen.