Used Car Market Sizing

Question

Dear Forum,

I am currently creating structure to calculate market size of used car in 2021.

Assumption:

1.It will be traded only once in useful life (10years)

2.30% of car owners like to trade their car.

3.Salvage Value (0)

Market size in USD=Number of new Cars purchased in 2016*30%*Price of car/10

How does it look like? Appreciate your comment. Thank you so much

Answer 1

Hi there,

Please don't forget to segment for most market sizings.

This is overly simplistic! Ultimately, you need to segment in a way that helps you get closer to the answer (i.e. takes you from guessing to estimating).

In particular, you need to segment #2. How many households are there in the US?

Hint: What segmentation most directly correlates with # and rate of car purchasing AND probability of used car purchasing?

Answer 2

Hi!

I'm not sure I got the level of your issue tree (1st level, 2nd level, etc.).

I have specific sessions regarding market sizing and specifically on how to structure and solve them like a top performer. Feel free to reach out if interested.

Best,

Anto

Answer 3

Hi there,

You need to work on your structure and assumptions. Structure needs to be more detailed, needs to be MECE (and I mean you missed both the mutually exclusive and the collectively exhaustive), and assumptions need to be more carefully considered.

1) and 2) are conflicting assumptions
3) is mentioned but not used. To be honest, it should not be used as part of the calculation, but can be a relevant datapoint to determine the minimum price of a used car.

What you need to think is:
- How many cars are out there (# sold cars * average lifetime)
- How many are sold as used every year (number of times it is traded)
- What is their value (value depending on when it is traded).

You should include some type of segmentation on the above.