as mentioned by Elias, the fact that you don't get the exact number is not a major problem in a market sizing so far that you are not an order of magnitude above or below the real number - your structure and logic are more important.

In terms of your structure, there are a couple of things that you are not considering that could strengthen it:

• Cars are not only bought by households, but also by businesses. This additional point doesn't change much the final numerical result but shows business acumen

• There is no justification for the number of cars per household. This is probably the main reason why you get a number which is too large, as segmenting by income in three different groups can lead to a lower number. A possible segmentation could be the following:

10% rich household --> 3 cars

70% mid income household --> 1 car (assuming one parent has a car and the other a motorbike/alternative vehicle)

20% poor household --> 0.5 cars (assuming 50% with 1 and 50% with 0)

Which gives a total of 1.1 cars/household.

I want to emphasize again that the actual final number is not particularly relevant - what is more important is that you provide a structured justification for the assumptions and logic.

Best,

Francesco

Hi Anonymous,

as mentioned by Elias, the fact that you don't get the exact number is not a major problem in a market sizing so far that you are not an order of magnitude above or below the real number - your structure and logic are more important.

In terms of your structure, there are a couple of things that you are not considering that could strengthen it:

• Cars are not only bought by households, but also by businesses. This additional point doesn't change much the final numerical result but shows business acumen

• There is no justification for the number of cars per household. This is probably the main reason why you get a number which is too large, as segmenting by income in three different groups can lead to a lower number. A possible segmentation could be the following:

10% rich household --> 3 cars

70% mid income household --> 1 car (assuming one parent has a car and the other a motorbike/alternative vehicle)

20% poor household --> 0.5 cars (assuming 50% with 1 and 50% with 0)

Which gives a total of 1.1 cars/household.

I want to emphasize again that the actual final number is not particularly relevant - what is more important is that you provide a structured justification for the assumptions and logic.

Best,

Francesco

This is very helpful. Thank you very much. I took this number "(avg 2 Cars)" from a quick search (source: https://smemagazine.asia/average-two-cars-per-household-in-malaysia/). This is from 2017. Unfortunately, the latest demographic data are not yet available. BUT, my original approach was very similar to the approach you shared. I got an average of 1.2 cars per household. —
Mike (Mustafa) on Oct 19, 2018

Market Sizing IS NOT about coming up with the right number, but a plausible way to A number. That way needs to be mathematically correct and based on realistic, defendable assumptions.

That being said, I believe you overestimate the number of cars per household. According to Wikipedia, Malaysia has 361 motor vehicles per 1000 people (data from 2010 though), so if your household size is correct, that would be about 1.4 motor vehicles per HH. Cars probably make up the largest part of all motor vehicles (motorcycles, which are very popular in south-east Asia are not counted in motor vehicles), so a realistic figure is maybe 1.2-1.3 cars per household. If you use 1.2 cars/hh, you end up with just under 1 mln cars per year.

(Quick googling showed me that currently there are about 70k cars being sold monthly, which is about 800k per year, which to me is pretty close to the 1 mln calculated)

But that does not really matter - your way is pretty plausible and your assumptions are not totally off the map, so you should be ok.

Cheers,

Elias

Hi Anonymous,

Market Sizing IS NOT about coming up with the right number, but a plausible way to A number. That way needs to be mathematically correct and based on realistic, defendable assumptions.

That being said, I believe you overestimate the number of cars per household. According to Wikipedia, Malaysia has 361 motor vehicles per 1000 people (data from 2010 though), so if your household size is correct, that would be about 1.4 motor vehicles per HH. Cars probably make up the largest part of all motor vehicles (motorcycles, which are very popular in south-east Asia are not counted in motor vehicles), so a realistic figure is maybe 1.2-1.3 cars per household. If you use 1.2 cars/hh, you end up with just under 1 mln cars per year.

(Quick googling showed me that currently there are about 70k cars being sold monthly, which is about 800k per year, which to me is pretty close to the 1 mln calculated)

But that does not really matter - your way is pretty plausible and your assumptions are not totally off the map, so you should be ok.

Cheers,

Elias

(edited)

Hi Elias. I actually got the figure from here (https://smemagazine.asia/average-two-cars-per-household-in-malaysia/) "avg 2 cars per household. However, I would like to highlight couple of things. There seems to be a drop in the number of cars sold in Malaysia. As of 2017, a little over 500,000 cars were sold, according to (https://paultan.org/2018/01/23/vehicle-sales-performance-in-malaysia-2017-vs-2016-a-look-at-last-years-biggest-winners-and-losers/). One thing that was off the mark for me was the estimation of number of cars in circulation. I am not sure where you got the figure of 800K. That is actually closer to reality, as you mentioned. Initially, I went with 1.2 cars per household exactly. I appreciate your comment. It is a great advice. —
Mike (Mustafa) on Oct 19, 2018

I am not sure if this will help, but does every household buy two cars? Assuming every household is just the same might be the problem.

Plus, as you said a car has an average life of 10 years, then a small percentage of people (who bought a car 10 years back) would buy a car this year. But there are other people who don't wait till 10 years to buy a new car. Weighing them might too work.

If you want to go deeper, then you could exclude the youth that believes more in cabs (and sharing) than buying a new car.

I hope this helps.

I am not sure if this will help, but does every household buy two cars? Assuming every household is just the same might be the problem.

Plus, as you said a car has an average life of 10 years, then a small percentage of people (who bought a car 10 years back) would buy a car this year. But there are other people who don't wait till 10 years to buy a new car. Weighing them might too work.

If you want to go deeper, then you could exclude the youth that believes more in cabs (and sharing) than buying a new car.

I hope this helps.

Hi Rohit, that's why you work with averages - there are some households with 0 cars and some with 4 or 5 or 20. ON AVERAGE every household has 2 cars (although that figure may be too high). Same thing with the average lifespan of a car. Some people change cars every year, some every 5, some drive a 30 year old car... Again, ON AVERAGE a car is used 10 yrs. Both are pretty valid assumptions for such a case. Breaking out separate groups in such a general question just adds to the number of assumptions you need to take and doesn't contribute anything to the accuracy of the solution. It would be different if the question were "how many luxury cars are sold in Malaysia each year". Then you would probably need to break down the population. —
Elias on Oct 18, 2018(edited)

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