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Market sizing : number of used cars sold per year in country X

Market sizing
New answer on Dec 31, 2021
2 Answers
6.1 k Views
Anonymous A asked on Jul 23, 2019

Just want to check if my approach is mathematically/logically correct:

1-Find total number of cars in country X (for example: number of households * # of cars per household)

2-number of new car purchases each year is : (1) /service life (10 years for example)

3-number of cars that are disposed due to end of service life or accident.

4- ( 1 - (2+3)) will give us total number of used cars.

5- divide (4) by service life, lets say 5 years since used (won't last as much so less than 10 years). to get number of used cars sold per year in country X

Assumption : no growth in market

Thanks in advance

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Vlad
Expert
replied on Jul 24, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

You should just make an assumption of how frequently the used car is sold during the lifetime based on your personal experience. Sales will equal The Total number of used cars * # of times it's sold per lifetime / lifetime

Best

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Marc on Jul 24, 2019

Great, I will add it.But, is my logic correct ?

Ian
Expert
Content Creator
replied on Dec 31, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

Providing some market sizing thinking for anyone revisiting this Q&A:

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

  1. Just like in a case, make sure you understand the question - what are you really being asked to calculate
  2. Decide whether a top-down or bottom-up approach is best
  3. Figure out what you know you know, and what you know you don't know, but could estimate
    1. This helps you determine how to split out buckets
  4. Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits
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