Sangar case Essay
1. How would you characterize the U.S. electric car industry in 2011? The U.S. electric passenger car industry in 2011 was described as being in its infancy, because it is still a new concept to buyers. However there are signs of growth from 2011-2015. Buyers do not consider the car because of price, travel range and vehicle size, along with other secondary concerns. 2. Based on HEV sales to date, how would you describe U.S. buyers of electric passenger cars? Based on sales to date, the segmentation of U.S buyers is seemingly a very “niche” market as it is segmented to middle aged, large income, warm urban or suburban climates. U.S consumers are wary/unaware of the new technology, which makes them apprehensive to purchase them, especially at the high prices they are being sold for (ie. They aren’t fully aware of how much value the technology adds to the car, so aren’t sure if they are even fairly priced). 3. What might be a customer value proposition for BEVs and PHEVs expressed in fewer than 25 words? “Driving electric; a luxury way to drive economically. Environmental friendliness, combined with the luxury comfort and power, all while using friendly energy.”
4. How should the Fisker Karma Sedan be positioned in the marketplace? It should be positioned to the slightly more wealthy individuals that have families. The sedan being priced over 100k makes it a luxury item that is at least attainable to this demographic of wealthier consumers. The targeting shouldn’t be marketed as “the one car your family needs,” however, it should be marketed as the next addition to your family that brings luxury and economics to the group of cars you may own. This is because there is a concern amongst consumers about the range the electric cars offer. Appealing to the sense of social “goodness” or the carbon footprint awareness as these customers would be more likely to purchase these cars feeling like they are “doing their part.”
5. What is the market potential for the Fisker Karma Sedan in Sanger Automotive’s dealership area? Sanger Automotive dealership covers market of Lee County and Collier County. Considering the high retail price of luxury vehicle Fisker Karma Sedan and prospective buyer behavior of electric passenger cars, we define the market for Sanger Automotive dealership are people living Lee and Collier counties with annual HH income exceeding $100,000. Therefore, potential market for Sanger dealership = new passenger vehicle annual purchase rate x HH of Collier & Lee with HH annual income exceeding $100,000 = 1.2% x (133,640x 20.2%+270,485×18.3%) = 918 units
6. How many Fisker Karma Sedans must a Sanger dealership sell to break even in its first year? What is the likelihood of this happening? According to the case, the fixed cost and upfront investment are listed below: Fixed cost Overhead for showroom and service bay $ 85,000 Two FT sales associates $ 79,500
Sales commission, % of retail sales 1%
Service manager and service bay technician $ 90,250
Marketing expenditure $ 66,000
Delivered cost, % of MSRP 90%
Delivered cost (min) $ 86,400
Delivered cost (max) $ 98,100
Upfront investment $ 200,000
Fisker Karma Sedan MSRP $ 96,000
In order to break even, the minimal quantity of cars to sell at the average retail price $102,500 (($109,000+$96,000)/2) for the first year is (85,000+79,500+102,500*x*1%+90,250+66,000+102,500*x*90%) =102,500*x, or roundup x = 57 Considering the market potential in the Sanger’s area and 15% of new cars sold are luxury brands, 57 units, that is 6.2% (57/918*100%) of market share, are likely to approach. 7. Should Sanger Automotive pursue an exclusive franchise agreement with Fisker Automotive? Why or why not? This decision is made tough due to the market demographics, the newness of electric car technology, and the overhead involved. As the market for electric cars increases, this early entry agreement with Fisker will allow Sanger to be one of the first to the market.
This agreement would work well for Sanger as it allows them to make use of their empty lot. As part of the agreement, Sanger should try to get Fisker to agree to some co-op advertising to help raise awareness in these markets since electric cars are fairly new to the consumers. It is important to gain the competitive advantage early in the industry’s life cycle. The importance of this is increased by the tax incentives that should promote purchasing behavior.