II. Analysis - 2. What could be possible reasons? - b) Idea 2: Cooperation with energy provider

Question

For the people who did not get the calculation, charging cycles per week is extra info that is not needed. All you need to know is how much kWh you need so you can multiply it by the price and then share of WyCar

However, this is the calculation:

Revenues: 10%*(0.25 EUR/kWh*20kWh/100km*15000km*80%)

Answer 1

You are correct in your statement.

I should highlight, however, that the answer provided in the case is not necessarily correct. There are a lot of things that are being erroneously disregarded:

Not considering time-value of money, it is at break even
Considering that you do a big investment upfront and get smaller ammounts of money in the following 5 years, i.e., considering time value of money, it is negative
Company faces a lot of risks: that the energy price may be different, that they may drive less than 15000kms, or that they will charge less at home. Of course, variation can happen in the opposite direction and be positive for them. They are not being remunerated for this risk.

But, there are two very relevant things that SHOULD BE CONSIDERED (and these comments help you get an offer):

We need to know the impact on our car sales. It seems indiferent to do this by itself, but if it drives car sales, then it may be a very good idea. How many more cars will we sell if we offer this? If for example we have a 5% margin on these cars, each additional car we sell will represent 5%*35k€=1.75k€… that's good money.
Clients may decide to keep on their contract after 5 years… meaning that every time that happens, the client has a relevant profit (of ~60€/year).

Taking these two points in consideration, there is room to argue that this initiative is likely to be very positive.

But let me put this the other way. The case objective is to improve car sales. Disregarding an initiative that is at breakeven without considering its impact on the case objective (increase car sales) should be considered WRONG and reflect negatively on the candidate.

And let me add that getting the math right is good. But what makes you pass the interview round is not the math, but the discussion over the consequencies of the math analysis.

Answer 2

Hi there!

To have a higher response rate here and also to get more out of the exercise, I'd recommend you give a first go to the answer yourself. Then we can chip in with feedback.

Best,
Cristian

Answer 3

Hi there,

I'm super concerned by the fact that you've asked 3 questions on just 1 single case here.

(Please don't feel like you can't ask questions by the way!)

But it does sound like you could really use a reset in how you're approach math (learning how to figure it out yourself).

Consider getting a coach. Check out rocketblocks (for math/charts/exhibits only). Review how you approach math (learn to take a step back, break it down, and figure it out yourself in order to maximize learning)