1. Problem Understanding

We want to estimate the annual passenger car sales in India.

This is a market sizing guesstimate using a top-down approach.

2. Approach Summary (Top-Down)

Population → Income Segmentation → Car Ownership Rate → Replacement Cycle

3. Step-by-Step Solution

Step 1: Start with India’s population

Approx population = 1.4 billion

Step 2: Estimate number of households

Average household size = 5 people

Number of households =
1.4B ÷ 5 = 280 million households

Step 3: Segment households by income (MECE)

Approx breakdown:

• High Income (5%) → 14M households
• Middle Income (30%) → 84M households
• Lower Middle (35%) → 98M households
• Low Income (30%) → 84M households

Only the first three segments meaningfully buy cars.

Step 4: Estimate car ownership penetration by segment

Total cars currently owned ≈ 37.1 million cars

Step 5: Consider replacement cycle

Average replacement cycle = 8 years for cars in India.

Annual replacement demand:
37.1M ÷ 8 ≈ 4.6 million cars/year

Step 6: Add first-time buyers

Assume 2% of middle + lower-middle households buy a first car each year:

Eligible households = 84M + 98M = 182M
2% of 182M → 3.6 million first-time purchases

Step 7: Total annual car sales

Annual replacement demand = 4.6M
Annual new buyers = 3.6M

Total = ~8.2 million cars per year

4. Final Answer

India sells ~8 million cars per year (approx).

(Real-world numbers are ~4–5M including commercial vehicles,
so our estimate is reasonable for a top-down guesstimate.)

5. Interviewer-Ready Summary

• Population → 1.4B
• Households → 280M
• Car-owning households → ~37M
• Replacement cycle → 8 years → 4.6M sales
• New buyers → 3.6M
• Final: ~8M cars sold annually