Daily Consumption rate vs full refill of cars at petrol station [Gas Station Case, Intermediate]

Question

I want to ask a question about the daily consumption rate calculated per car vs the capacity refill of each car at the petrol station as part of this demand-led market sizing.

We calculate that each car uses 50L of fuel over the course of 10 days, which approximates to 5L of fuel per day as the daily consumption of a car.

Later, we assume that as a weighted average, cars refill to the maximum capacity of 50L whereas industrial cars refill to 100L. We then take a weighted average of 20% and 80% respectively to get the final figure as the refill average of 60L as the average fuel supplied per vehicle per day.

However, I'm unsure how the two numbers work together (if anything, appear to conflict). We deduce that each car uses 5L of fuel a day but then refill to 60L on average per day.

I want to ask how this makes sense logistically or whether these figures are in isolation and should not be assessed in the same environment as per the two differing branches of the case.

Answer 1

Dear,

Great question! Allow me to provide clarification on why the proposed solution is correct. The two numbers you are comparing represent the demand and the supply.

Regarding the demand side, as per the assumptions outlined in the provided solution, on average, a vehicle consumes 9 liters of gasoline each day. This is an estimate that suggests that, if we consider the 2.5 million vehicles in Paris, each of them, on average, consumes 9 liters of gasoline daily.

On the supply side, the case aims to determine the average amount of gasoline filled into each car when visiting a gas station (assuming that if a vehicle goes to a gas station, it will fill up the tank completely). Based on the provided assumptions, this value is calculated to be 60 liters. It's important to note that this doesn't imply that every vehicle in Paris will refill with exactly 60 liters of gasoline daily. Instead, it signifies that, at full capacity, each gas station will, on average, serve 400 vehicles, and each of these vehicles will request, on average, a refill of 60 liters.

As you can see, it's unreasonable to assume that all cars will refill their tanks every day. In fact, if you multiply the average number of cars served by each gas station by the estimated number of gas stations in Paris, you'll arrive at a smaller number, which corresponds to the number of cars visiting the gas stations in Paris (approximately 375,000).

An important assumption to consider here is that gas stations are sized to operate at full capacity, meeting all the demand (i.e., no market gap). Additionally, this analysis does not take into account other vehicles that require gasoline, such as motorcycles.

I hope this clarifies the situation for you. Please don't hesitate to reach out if you have any further questions.

Best regards,
Antonio

Answer 2

Hi there, I would be happy to share my thoughts on your question: First of all, your approach seems valid, although t... (read entire answer)

Hi there, I would be happy to share my thoughts on your question: First of all, your approach seems valid, although there are always aspects that could make it more precise.More... (read entire answer)

Answer 3

Hey there, A great example for learning how to approach any market sizing question step by step. Let‘s get to work! G... (read entire answer)

Hey there, A great example for learning how to approach any market sizing question step by step. Let‘s get to work! General comments In this case, I would propose a supply side... (read entire answer)

Answer 4

Honestly this is quite broad of a sizing and not something I usually hear of. Usually if you are applying to a consul... (read entire answer)

Honestly this is quite broad of a sizing and not something I usually hear of. Usually if you are applying to a consulting firm pretty strong on a vertical or if you are intervie... (read entire answer)