Forecasting sales and product evolution: The case of the hybrid/electric car

We present a model that forecasts sales and product evolution, based on data on market and industry, which can be collected before the product is introduced. Product evolution can be incremental but can also take place by releasing new generations. In our model adoption of a new product is motivated by attribute improvements (enabled by technology evolution), and firms' attribute improvements strategies are motivated by market growth and directed by market preferences. The interdependency between attributes' improvements and cumulative adoption level makes the problem inherently dynamic. The dependency of attribute levels on adoption levels is assessed using industry and technology analysis. Market preferences and purchase intention response to attribute levels changes are assessed based on a conjoint study. The option of collecting and interpreting data about both demand and supply aspects, before the new product is introduced, enables us to estimate sales and technology progress endogenously rather than to require them as inputs. We demonstrate the method on the hybrid car market.

Research highlights
► The model captures the mutual influence between market preferences and technology.
► Technology progress expands the market and convince hesitant customers to adopt.
► Market growth motivates firms to invest more in R&D and product improvements.
► We demonstrate our method on the hybrid/electric car case.
► We forecast that hybrids and electric cars will dominated the market within a decade.