## Determining Future Prices For ClothesWasher U.S.DepartmentofEnergy fC~l^^^\M^ ^^ 

## W ashers Workshop Office ofEnergy Efficiency 

## Clothes Washers and Renewable Energy July23, 1997 1000 Independence Avenue, SW Washington, DC 20585 

# ·k 93/A Clothes Washer Workshop: Price Forecasts 

## Introduction 1VI Prices are used inthe following analyses

- Life-cycle cost analysis (Retail Prices)

-Manufacturer impact analysis (Manufacturer Prices) A/ Relationship between retail and manufacturer prices

- Average distributor mark-up?

- Same relative uncertainty range?

DRAFT July9. 997Clothes Washer Workshop: Price Forecasts 

## Different approaches could be used to determine retail prices. 1/ Survey of existing market prices 4/ 

## Expert Forecasts v/~ 

## Various mark-ups overvariable costs/manufacturing costs

DRAFT July 9, 1997 3Clothes Washer Workshop: Price Forecasts 

## A survey ofexisting retail prices could helpestimate future prices and validate mark-up assumptions. 

## DOE has initiated amarket assessment of the clotheswasher industry. Current pricing of existing models will be researched. 

# VIWhat data sources exist? 

# Vi What factors may limitthe usefulness

- Products not inmarket, or inlowquantities

- Efficiency features bundled with non-efficiency features

- Change inefficiency descriptor

- Standards may commoditize features and thus alter pricing

DRAFTJy u9.1997 4Clothes Washer Workshop: Price Forecasts 

## Expert Forecasts 

# V. Manufacturer cost data sheets include a column labeled "Estimated increase inretail price". Format could be modified to include a range orother features. [-. DOE will considerany additional forecasts received incomments.

DRAFT Jly 9 1997 5Cioihes Wvasher Wvorkshop: Price Forecasts 

## Different Mark-ups have been used in past analyses. Source Manufacturer Retail Total Mark-up Mark-up Mark-up Consumer Products Efficiency Standards-1 9821 1.3 7 1.70 2.33 Energy Conservation Standards for

Consumer Products--1990 TSD2 1.37 1.46 2.00

1991 AHAM report-Impact of 1 , 1.534 1.475 H-Axis Standards 1.003, 4 1.475

Market Survey5 1.33 Market Survey6

- 1.35 Vertical analysis of SEC 10-K financial statements 1.42 1 1982 Engineering Analysis Document for Consumer Products Efficiency Standards. Markup overtotal manufacturing cost. 2 1990 TSD and DOE's comments onthe Mark-ups for thefinal rule. (pg. 22256, Federal Register/Vol.56, No. 93/Tuesday, May 14, 1991/ Rulesand Regulations.) Mark-up over long-term variable cost. 3 Scenario 1: Simple pass-through of incremental variablecosts. Report prepared byADL. 4 Scenario 2: Level required to maintain current (1991) industry value. 5 Based on retail pricesobtained from marketsurvey conducted by Dealerscope Merchandizing, and manufacturer sales price information extrapolated from manufacturer shipments and revenuesfrom the 1996 AHAM Fact Book. 6 Based on retail prices obtainedfrom ELCAP market surveys, and information extrapolated from manufacturer shipments and revenuesfrom the CIR, code36330.31. 6Clothes Washer Workshop: Price Forecasts 

## Based on past analysis the Department is seeking comment on a 2-step mark-up strategy that incorporates different cost pass-through assumptions.
.·- : "Manufacturing Cost Manufacturer Mark-up Range [ 1.00 to 1.42 ] i Manufacturer Price 

### : Retail Mark-up Range [ 1.30 to 1.475 ]

- !ru' ' | expe

a s 'Retail Price The mark-ups would be expressed as probabilitydistributions. DRAFT July9, 1997 7Clothes Washer Workshop: Price Forecasts 

## Illustrative probabilitydistributionsfor Mark-ups. Manufacturer Markup Manufacturer Mark-up Minimum mark-up 1.00 Likeliest mark-up 1.21 Maximum mark-up 1.42 1.00 1.21 1.42 RetailerMarkup Retail Mark-up Minimum mark-up -1.30 Likeliestmark-up 1.39 ~- e~LMaximum mark-up 1.48 1.30 1.39 1.48 Forecast: TotalMarkup 1,000 Trials Frequency Chart 0Outliers Proba y dn .031 31 Probability distribution for Total Mark-up
-- - - - - - - - - - - - - - .o . . . . . . ... . . . ... 23,25 .0* 2 3 ; -- - . l . . . -1235 (from variable manufacturing .0,6 ..s J9...... . |I l..-.. .. .. .... , I5.5 | costto retail price)

& 1 ~~~~~~.008~,,. . .. 1.30 1.50 1.70 190 2.10 DRAFT July 9, 1997Clothes Washer Workshop: Price Forecasts 

## Summary Consistentwith the process rule, prices will be described within an uncertainty range. 

## The Department will use allthe approaches previously described to bound the uncertainty. The mark-up approach will use various assumptions about cost passthrough. 4/ 

## The price forecasts will be reported as probability distributions and used as inputto the Manufacturer Impact and Life-Cycle-Cost analyses.

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