Albon crashed his Williams FW46 in opening practice after losing control over the kerbing at Turn 7 and leaving the chassis with irreparable damage.
Albon sat out Free Practice 2 as the team assessed its options before confirming that it would move its lead driver into its second car.
“Following Alex Albon’s accident during FP1 at the Australian Grand Prix, Williams Racing confirms that due to the extensive damage sustained, it is forced to withdraw the chassis for the remainder of the Grand Prix,” it announced.
“The chassis will be returned to the team’s HQ at Grove for repair.
“Due to the fact that a third chassis is unavailable, the team can confirm it has taken the decision for Alex to compete for the remainder of the weekend in the chassis that Logan Sargeant drive in FP1 and FP2.”
The news comes as no surprise, with Albon’s ongoing participation in the weekend in doubt as Free Practice 2 began.
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“We are hugely disappointed that the damage sustained to the chassis has meant we need to withdraw it from the weekend,” said team boss James Vowles.
“It’s unacceptable in modern day Formula 1 not to have a spare chassis, but it is a reflection of how behind we were in the winter period and an illustration of why we need to go through significant change in order to get ourselves in a better position for the future.
“As a result, we have had some very difficult decisions to make this afternoon.
“While Logan should not have to suffer from a mistake that he did not make, every race counts when the midfield is tighter than ever, so we have made the call based on our best potential to score points this weekend.
“This decision was not made lightly, and we cannot thank Logan enough for his graceful acceptance, demonstrating his dedication to the team; he is a true team player.
“This will prove a tough weekend for Williams, and this situation is not one that we will put ourselves in again.”
Albon added: “I have to be totally honest and say that no driver would want to give up his seat.
“I would never want anything like this to happen. Logan has always been a consummate professional and a team player from day one, and this won’t be an easy one for him to take.
“At this point though, I cannot dwell on the situation and my only job now is to maximise our potential this weekend and work with the whole team to make sure we do the best job possible.”
Following the second hour of practice, the Williams team moved Sargeant’s car to Albon’s side of the garage, suggesting the Brit would take over the car.
Williams is in a building period as it works to catch up lost time in terms of investment over recent seasons.
Previously, it has not had a robust system in place to track components during the design and build process – a point team boss James Vowles has pointed out on multiple occasions.
This season, the first Williams chassis was ready only a day before pre-season testing in Bahrain, with Albon and Sargeant sharing the car across the three days.
A second chassis arrived in time for the start of the season but there has not been sufficient time to complete a third.
As such, without the spares to build up a replacement car for Albon, it has instead opted to bench Sargeant.
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