The Race is reporting that Red Bull and Honda are on the cusp closing a deal in which Red Bull will take over the Honda F1 project after the Japanese manufacturer leaves F1 at the end of the 2021 season. This will entail Red Bull taking over Honda's products and IP and maintain the engines itself in its new Milton Keys facility. This will also include Red Bull absorbing some of the Honda staff but will also get some third party support.
This has been on the cards ever since Honda's exit from the sport was announced. Masashi Yamamoto, Honda's F1 boss had indicated that this would be a possibility. Red Bull has been adamant on a works like status with an engine partner which will allow its full vertical integration between the chassis design and powertrain, something no other engine supplier can offer as all the other three have their own works teams.
Red Bull executives have also threatened to leave the sport if their wish is not fulfilled. However, this wish comes with more roadblocks even if a deal with Honda is on the cars. Red Bull wishes for a technical freeze over the development of the engine at the end of the 2021 season as it believes it neither has the technical ability nor financial ability to further develop the power unit especially because Honda is bringing a brand new design in 2021.
However, this faces opposition from Ferrari and Renault. Ferrari is the major hurdle as it needs to further develop its engine as its massive drop in horsepower after the technical directives at the fag end of the 2019 season caused its 2020 car to suffer massively. Its two customer teams also suffered from Ferrari going from having the strongest engine to the worse one on the grid.
Ferrari team principal Mattia Binotto has been receptive to the idea of an engine freeze, but there are some caveats to his agreement. Binotto wants the next engine concept to be pushed ahead from 2026 to 2025 and wants a competitiveness mechanism in place which will allow any engine manufacturer some leeway to develop in the case finds itself massively behind.
After the 2019 technical directives, Ferrari found its hands tied thanks to the 2020 COVID19 induced cost cap issues that denied it a chance to fix its engine. Ferrari is confident that its 2021 engine will be competitive but perhaps will still not be as good as the Mercedes engine. Ferrari presumably wants to develop its engine further. Red Bull boss Christian Horner is in agreement with this as well.
However, Renault and Mercedes are of the belief that such an artificial convergence mechanism shouldn't be allowed as already F1 is in the 7th year of the hybrid era and enough convergence has happened. If an agreement isn't reached Red Bull's plan could be scuttled as Ferrari also has a "veto" power which it could use. In that scenario, Renault, Red Bull's former engine supplier would be forced to supply to Red Bull.