Car-related estimation questions

Hi there,

I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:

• Personally, I would approach the first question from a demand-based perspective (i.e., identifying the number of cars per household and how many of them are sold to another household in a given year), and the second question from a needs-based perspective (i.e., assessing how many repairs a car has across its lifetime, how expensive they are, and what that means for the yearly costs, multiplied by the total number of cars). However, I would also appreciate seeing your proposal for it.
• However, please keep in mind that most major strategy consulting companies have not used standalone market size estimations for a long time. While this does not mean it never happens, this type of case study question may not be very meaningful for both the candidate and interviewer, as only a few skills are being tested.
• That being said, simpler market size estimations may still be a part of a case study, for instance when estimating the revenues of the client company is required.

If you would like a more detailed discussion on how to address your specific situation, please don't hesitate to contact me directly.

Best,

Hagen

Hi there,

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 there, 

These are interesting questions, but you might get more out of them if you provided a proposal first. This way you'd get tailored feedback out of this conversation. 

Best,

Cristian

Why don't you give a try?

For the first one, you just have to:

• Estimate the total number of cars in the UK:
  • Number of families (Population / average number of people in a family)
  • Number of cars per family (you can segment based on wealth or based on urban/suburban/rural)
• How many of these are traded in a given year:
  • How many times they are traded during their lifetime?
  • And then divide by their lifetime
• Consider how many used cars are actually exported (or imported). In the case of the UK, probably not many, as their closest markets are the EU and the drivers seat is not on the same place as in the UK. But they can still export used cars to India, South Africa, Australia…