The new formula limited supercharged engines to 3 litres and unsupercharged engines to 4.5 litres, and added approximately 100 kg to the minimum weight, bringing it to around 850 kg. The intention was to reduce the extraordinary power levels — approaching 650 bhp — that had characterised the final year of the 750 kg Formula, making cars somewhat more manageable and slowing speeds on circuits that were becoming dangerously fast. In practical terms, some cars that had been marginally competitive at the top of the old formula automatically complied with the new weight and engine limits and could continue racing without wholesale redesign.
The Mercedes-Benz W125 and Auto Union Type C, with their vast large-displacement engines in ultralight chassis, could not continue under the new rules. Both teams were compelled to design entirely new cars.
Mercedes-Benz introduced the W154, powered by a 3-litre supercharged V12 engine. Auto Union responded with the Type D, also a 3-litre supercharged unit but maintaining the mid-engine layout that had characterised all their grand prix cars since 1934. Both were highly developed from their first appearances and soon proved capable of continuing German dominance despite the wholesale change in technical regulations.
Alfa Romeo and Maserati, whose cars had been more closely matched to the new limits from the outset, hoped the regulations would narrow the gap to the German teams. In practice, neither was able to mount a genuine championship challenge.
The championship comprised four rounds. Caracciola did not win the championship through dominance of individual races but through a pattern of finishes that accumulated points across all events. He won one of the four championship rounds and placed on the podium in the remainder — a display of measured consistency that reflected both his exceptional racecraft and Mercedes' strategic management of the title.
Auto Union faced the additional disruption of losing Bernd Rosemeyer, killed in a speed record attempt on the Frankfurt Autobahn in January 1938, before the season began. His death robbed the team of its most spectacular performer at the moment of a major technical transition and left a significant gap in the driver roster.
Hermann Lang continued to develop within the Mercedes team, serving as a reserve and support driver while demonstrating growing pace that would position him for a more central role in 1939. The Italian teams performed the supporting roles that had become their realistic expectation in this era of German financial and engineering superiority.
Caracciola claimed his third European Championship, matching his titles of 1935 and 1937. His ability to score consistently without requiring outright race victories underlined the maturity of his approach. The Mercedes team's management of the season — identifying which events and which championship points were most critical — was as significant as the performance of the W154 itself.
The 1938 season demonstrated that the new formula, despite being designed in part to rein in the runaway performance of the German cars, had not altered the competitive order in any fundamental way. Mercedes and Auto Union remained in a class of their own relative to the Italian manufacturers and the rest of the European field. The geopolitical situation in Europe was deteriorating rapidly — the Munich Agreement came in September 1938, just as the championship season concluded — and the question of how long international motor racing could continue as normal was becoming impossible to ignore. The 1939 season would bring the answer.