CONTEXT

The Governor of Bangkok is interested in transforming Bangkok into a city for electric vehicles only, to help reduce the city’s levels of air pollution from transport. As a first step, they are considering converting all the gasoline-run auto rickshaws, known as tuk-tuks, to electric vehicles. They have asked Dalberg for help in thinking through how to make this a reality.

Question 1: Part A

As a first step, the Governor’s Office have asked us to estimate how many tuk-tuk journeys are made in Bangkok each month. How would you go about doing this?

Answer

First, outline a calculation structure without numbers (to identify which numbers to ask for/estimate). There are several ways of conducting the calculation, including, but not limited to:

  1. Bangkok population x % of population who ride tuk-tuks x average # of rides each month
                                                                                  or
  2. Number of tuk-tuk drivers in Bangkok x average # of rides completed daily x average # rides each month

Next, set out your assumptions and estimate the figures needed. If there is a figure you are unable to estimate, you can request the data from your interviewer. In some cases, your interviewer will prompt you to make an educated guess based on your contextual knowledge. In these instances, you will not be evaluated on the accuracy of your estimations.

For instance, in this case, if prompted, your interviewer can tell you that the population of Bangkok is similar to Paris, Bogota, Jakarta, or Hyderabad.

Hint: when estimating figures, choose round numbers to make the calculations easier.

Example assumptions for calculation structure 1:

  • Estimate the population of Bangkok at 10 million.
  • To estimate how many people ride tuk-tuks, you could segment the population in different ways. For example, you could assume that ‘commuters’ are the largest segment of individuals riding tuk-tuks.
    • Define ‘commuters’ as ‘employed individuals between the ages of 20-60
    • Estimate life expectancy at 80 years of age, and equal population distribution. (Note: In this case you could provide some context into your decisionmaking by pointing out that you are aware that the population age structure is not equally distributed, as population is growing rapidly and therefore concentrated in younger age groups. However, for simplicity of calculations you have decided to assume an equal distribution.)
    • Assume 80% employment amongst 20- to 60-year-olds
    • Assume that 40% of commuters own a car or reach work through other means (walking, cycling, public transport), while the remainder ride tuk-tuks.
  • Assume that each commuter takes two rides each working day (to work and back)

Therefore: 10 M x (50% of individuals in commuter age range x 80% employed x 60% riding tuk-tuks) x (20 working days per week x 2 rides per day) = ~100 million rides per month.

Example assumptions for calculation structure 2:

  • Estimate the # of tuk-tuk drivers, based on a rough employment segmentation, e.g.:
    • 30% of individuals employed in services, based on a sector breakdown of other emerging economies where agriculture and industry remain the largest.
    • 10% of individuals employed in services working in transport
    • 1/3 of them being tuk-tuk drivers
  • Estimate the number of rides given by each driver per day, using:
    • Assume the length of an average working day is 10 hours
    • Assume the average duration of a ride is 15 minutes
    • Assume each driver works 6 days per week

Therefore:  (5 M individuals of working age x 30% working in services x 10% working in transport x 1/3 tuk-tuk drivers) = 50,000 tuk tuks.

50,000 tuk-tuks x (10 hours a day x 4 rides per hour) x 24 days = ~50 million rides per month.

Note: the final value calculated is not important – we are evaluating your calculation structure and ability to make sensible assumptions.

Question 1: Part B

Sense check: Your team has done some additional research, and found that the average distance travelled by each tuk-tuk per month is 500 km. How does this a change your answer?

Answer

Sense-check questions are intended to evaluate how you incorporate new information to edit your original estimates. You will not be penalized if this new information is conflicting with your original estimates—in fact we encourage you to use this data to refine and re-evaluate your own assumptions.

In this case, having discovered the average total distance travelled by each tuk-tuk per month, you can estimate the average distance of each journey, and assess if this is reasonable. You had already estimated that each tuk-tuk would make (10 hours a day x 4 rides per hour x 24 days) 960 journeys per month. This would mean that each journey on average would cover a distance of ~500 meters, in 15 minutes. Does this sound reasonable?

You could argue this seems too low, even when taking into consideration possible traffic. If this is the case, consider which assumptions you could correct in your original formula, based on the new information at hand. For example, you could lower your estimate of rides per hour, taking into account possible waiting times between rides.

Question 2: Part A

Focusing on the environmental benefits of the proposed intervention, the Governor’s Office would like to know what the change in annual fuel emissions (aka CO2 emissions) would be, in millions tons per year, if all the tuk-tuks in Bangkok were replaced with electric vehicles.

The following data is available:

  • Fuel efficiency of a tuk tuk: 1 liter / 5 kilometers (kms)
  • CO2 emissions per liter of gasoline: 10 kilograms (kg) per 1 liter (l) (kg/l)

Hint: Feel free to clarify any terminology and confirm any conversions. For example, if requested, your interviewer can explain that CO2 is emitted as you drive and is typically calculated per liter of fuel used. 1 ton = 1,000 kg. Also, for now, you can assume electric vehicles have no CO2.

Answer
  • Number of tuk-tuks in Bangkok (50,000) x distance travelled each month (500 km) x liters of gasoline consumed per km (0.2) = 5,000,000 liters
  • 5,000,000 x CO2 emissions per liter of gasoline (10 kg/l) x 12 months = 600 million kg
  • Convent MN kg to MN tons =6 million tons

Question 2: Part B

In the previous question, we assumed that switching to electric tuk-tuks will result in a significant reduction in carbon emissions. Are there any additional emissions created by the transition that we should also be considering? If so, what might they be?

Answer

This is a very open-ended question, where you can share some potential levers / factors, and prioritize their importance. This is also a question to test your ability to see outside the box. A good answer will come up with a list of such ideas, whereas a great answer will be able to organise the list in a structured framework, for example organising answers across the tuk-tuk’s lifecycle (manufacturing, usage, end-of-life) or by tuk-tuk emissions vs. surrounding infrastructure etc.

Possible answers may include:

  • Manufacturing: Energy-intensive manufacturing rocesses due to lithium batteries used by electric vehicles
  • Usage: Charging electric vehicles require use of electricity, which in Thailand is ~80% in from non-renewable sources (mostly natural gas, followed by coal).
  • End-of-life: Given the different material make-up of the engines, recycling or discarding parts from electric tuk-tuks may have unintended environmental consequences
  • Surrounding infrastructure: Bangkok may not yet have sufficient infrastructure for the charging of electric vehicles, and building this infrastructure may result in increased emissions (e.g. constructing charging stations, etc.)

 

 

Question 3

Your interviewer shares that Thailand’s CO2 output is 250 MN tonnes annually, and that the total population of Thailand is ~70 million, and you are asked to determine whether there is a sufficient impact case to move ahead with the plan to replace all tuk-tuks in Bangkok. Assume that 30% of all emissions come from transport sector (compared to other polluting sectors, e.g. energy generation, industry, agriculture, etc.).

Answer

This new information can be leveraged in a number of different ways to evaluate and interpret calculated figures. For example, given that the objective of the Governor’s Office is to reduce vehicle emissions in Bangkok, you could calculate what % of all vehicle emissions in the city would be reduced by this intervention.

  • Assume that transport-based CO2 emissions scale with population size (focusing on individual-level transport, rather than freight, etc). Using this as a starting point, you can estimate the total CO2 emissions on Bangkok by scaling the calculation (multiplying the total emissions of Thailand by 10 million people in Bangkok / 70 million in Thailand).

Therefore: 0.6 MN tonnes / (250 MN tonnes x 0.3 from transport x (10 MN people in Bangkok / 70 MN in Thailand)) = tuk-tuks cause ~6% of all vehicle emissions in Bangkok.

Candidates should then sense check this answer and provide explanations on whether they would recommend this intervention to the client from a purely impact-based perspective. For example, given that we assumed earlier that ~25% of individuals in Bangkok are commuters and ride tuk-tuks regularly, is the impact proportional? There is no right or wrong answer, we are simply testing the rationale used to substantiate your answer.

Question 4

The Governor’s Office is thinking of introducing a buy-back scheme for polluting tuk-tuks, and giving tuk-tuk drivers a subsidy at the point of purchase (in the form of a cash grant) to stimulate drivers to replace their vehicles, assume all drivers own their vehicles. How would you structure an analysis to understand at what price point the subsidy should kick in?

Answer

Candidates should start by identifying the overall objective:

To stimulate uptake of electric tuk-tuks, drivers must be made at least better off (meaning they will be more likely to be indifferent to conventional vs. gas-powered technology) when choosing between conventional tuk-tuks and electric models. You will need to calculate a break-even point to understand whether this is the case.

Here, specific elements are required for the answer, breaking down the cost structure for tuk-tuk drivers with a conventional and electric tuk-tuks:

  • Fixed costs: Purchase price; any purchase taxes (e.g. VAT)
  • Ongoing costs: Operating costs (e.g. cost of fuel vs. electricity per km traveled); annual taxes; insurance cost; maintenance costs; resale value of the tuk-tuk at end of vehicle’s lifetime, lifetime of each vehicle.

Candidates should use these elements to construct a formula, for example:

Purchase price of conventional tuk-tuk + (Annual operating cost of conventional tuk-tuk + Annual taxes of conventional tuk-tuk) x average lifetime = Purchase price of electric tuk-tuk + (Annual operating cost of electric tuk-tuk + Annual taxes of electric tuk-tuk) x average lifetime

Hint: At this point, you might be asked to apply numbers to this framework. If so, you can refer back to some of the numbers uncovered in the previous questions (e.g. fuel efficiency of a conventional tuk-tuk) and ask for any additional data points required (e.g. purchase price for each vehicle, taxes, average lifetime, etc.)

Question 5

Besides the subsidy, which other areas will require investment to support the transition?

Answer

The candidate should develop a MECE (mutually exclusive and collectively exhaustive) framework of other costs, including:

  • Production: Investment in the supply chain for electric tuk-tuks to meet demand
  • Enabling infrastructure: Charging stations for tuk-tuks around the city, sufficient energy supply available for charging, etc.
  • Transition support: Any support required for drivers to transition to electric cars
  • Communications campaign: Targeted at drivers and riders to promote the initiative

Hint: in this question, we are not looking for specific ‘right answers’; rather, we want to see you demonstrate structured thinking in identifying the main cost categories in a MECE way.

A great answer will add some nuance around the costs, for example considering which cost categories will likely fall to the Governor’s Office or its partners (e.g. transition support, communications campaigns, etc.), and which are likely to attract private sector investment, if the subsidy generates sufficient market demand (e.g. production of vehicles, charging stations, etc.).

Question 6

The Governor has just walked into your office to get a quick update on the status of the engagement. What is your 30-second update?

Answer

You should be able to provide a quick summary which includes:

  • Transitioning to electric tuk-tuks could provide significant positive environmental impacts, and Bangkok would help abate ~0.6 million tons of CO2 (6% of total vehicles emissions in Bangkok)
  • To encourage drivers to move to electric vehicles, the Governor’s Office could implement a price-point subsidy. This would be effective if it allows drivers to own and operate electric tuk-tuks at the same cos or lower, than conventional tuk-tuks.
  • However, the Governor’s Office must be prepared to make a series of other, parallel investments for the initiative to be a success.

A good answer will summarise the main elements of the case. A great answer will make additional considerations (e.g. unintended consequences, risks, etc.) to add nuance to the answer, but remain concise and focused on the Governor’s key ask.

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