How many cars are sold in the UK annually?

Hi,

There are many ways to do it but here's a structured approach to help you estimate the market size:

Define the Market: Clarify the scope of the market you are analyzing. Are you interested in new car sales, used car sales, or both? Make sure you and the interviewer are aligned on what you're estimating.

Population Estimate: Start with an estimate of the total population of the UK. You can use official government statistics or reputable sources for this figure. Let's assume it's around 68 million.

Household Estimate: Determine the average household size in the UK. Typically, this is around 2.4 to 2.5 people per household. You can also ask the interviewer if your assumption is reasonable.

Car Ownership Rate: Assume the average car ownership rate per household. This can vary based on urban or rural areas, income levels, and other factors. For instance, if you assume that 70% of households own at least one car, you can calculate the number of car-owning households.

Average Number of Cars per Household: Estimate the average number of cars per car-owning household. This can vary as well, with some households having multiple cars while others have only one. Assume an average, e.g., 1.2 cars per car-owning household. Again, verify the feasibility of your interviewer and make sure to present a reasoning for your assumptions.

Total Cars in the UK: Multiply the number of car-owning households by the average number of cars per household to estimate the total number of cars in the UK.

Annual Car Sales per Person: Research or assume the average frequency of car purchases per person in the UK annually. This might be influenced by factors like population growth, economic conditions, and car lifespan. A common assumption is that cars are replaced every 7-10 years, which corresponds to 0.1 to 0.14 cars per person per year.

Market Size: Multiply the total population by the annual car sales per person to estimate the annual market size for car sales in the UK.

The formula for estimating the market size would look like this:

Market Size = (Population) x (Car Ownership Rate) x (Average Number of Cars per Household) x (Annual Car Sales per Person)

Keep in mind that this is a simplified approach, and actual market size estimation can be more complex. It's crucial to explain your assumptions clearly. Additionally, consider any specific factors or trends that might affect car sales in the UK, such as economic conditions or shifts in consumer preferences.

Hi Gee,

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

Hi Gee,

Lots of useful answers below already, so just wanted to add another resource to help you understand different structuring methodologies:

• Free Guide: Mastering Structuring & Brainstorming

Best,
Cristian

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Practicing for interviews? Check out my latest case based on a first-round MBB interview >>> SoyTechnologies  

Hi Gbenga,

suggest you give it a try and post your proposed approach - will make it a bit easier for coaches to give you concrete feedback.

Generally speaking, this type of question will require a demand-sided market sizing approach, where you should segment the UK market (user base) into different customer groups and gauge their resp. appetite to buy.

If you'd like to learn how to do sizings both on the supply and demand side, don't hesitate to reach out to me or other coaches. 

Hope this helps.

Regards, Andi

Hi Gee,

There are different ways of breaking this down, but I would do roughly something like this:

• Start with the UK population
• Estimate # of car owners (some factors you might want to consider include family size, age, income here)
• Estimate how many of them are going to be buying a car each year

If you try to lay out your approach to this question, we can offer some feedback!