Reference no: EM133496620

Problem: You work for a management consulting firm that has recently landed a new client -- an electric vehicle (EV) manufacturer that has been selling passenger vehicles for the past two years. This EV firm is still much smaller than Tesla, but it has enjoyed 40% annual sales growth since 2021. Over the past two years, they have faced the usual problems that challenged all manufacturers, including labor shortages and supply-chain issues. At this time, the firm is operating smoothly, but they are concerned about potential changes in the coming year. In particular, your chief economist has already reported to the client that interest rates are likely to increase by at least one percentage point later in the summer, inflation is expected to continue at 3.5% to 4% for the remainder of the year, and there is a 60% chance of a mild recession during the coming fall and winter. Your firm has placed you in charge of the EV firm's account. Your first task is to explain to the firm how the expected changes (higher input costs, higher interest rates, and temporarily lower consumer income) will affect the expected price and sales volume in the EV market.