Market Sizing - # of Cars in California market?

Market sizing
Edited on Nov 20, 2019
2 Answers
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Anonymous A asked on Nov 20, 2019

Hello!

I was wondering if my approach for the following market sizing question makes sense -

# of Cars in California

Start with the total population of California and multiply that with an estimate % of those who own cars to find # of people who own cars. Multiply this by average # of cars per person to find # of cars currently in the market.

Does this make sense? Am I missing something that could make my structure more accurate?

I'm sorry if this seems like an easy question, just want to make sure I have the right train of thought!

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Antonello
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replied on Nov 20, 2019
McKinsey | MBA professor for consulting interviews

Hi,
starting from the population is correct, but I would go more in detail by considering 2 types of segmentation: age and net worth. Considering their related number of cars per person you can be more accurate with the estimation.

Best,
Antonello

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Vlad
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updated an answer on Nov 20, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

  1. Check with the interviewer if it is the primary or secondary market
  2. Calculate the number of households
  3. Assume a certain # of cars per household
  4. Calculate total # of cars
  5. Calculate the market by applying the replacement rate (once it 10 years or 1/10 if we are just calculating the new cars)
  6. Add commercial vehicles (e.g. every 5th car in the street is commercial, thus you need to divide by 80%. Apply a different replacement rate for commercial (e.g. 1/5)

Best

(edited)

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Antonello gave the best answer

Antonello

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McKinsey | MBA professor for consulting interviews
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