A ‘perfect storm’ points to a much smaller U.S. auto market by 2040

Ten years ago, a record 17.6 million cars, trucks and SUVs were sold in the United States. Some estimates say the country may never come close to that figure again.

Analysts at consulting firm Bain & Company said there are many signs that the market is about to tighten further. According to their analysis, falling birth rates, behavioral changes, higher car prices and increasing alternatives could reduce sales by as much as 2 million units by 2040.

Mark Gottfredson, a partner at Bain & Company, said these indicators point to a future in which automakers compete fiercely for a shrinking number of customers.

Gottfredson said the auto industry has historically been tied to a 1% annual growth rate that has trailed overall population growth. But government statistics around the world show that population growth is slowing and some countries are already seeing declines.

Gottfredson said, “Isn’t it a perfect storm?” he said. “It starts with population decline. You’re no longer a growing industry. You’re a declining industry. You’re a declining industry at a time when technology is disrupting everything.”

The fertility rate in the US in 2025 was approximately 1.6 births per woman. Although not as low as some countries in Europe and Asia, this rate is considered below the replacement rate of 2.1, according to the Centers for Disease Control.

Bain said this is offset by relatively high immigration (about a million people come to the U.S., according to the historical average he cites). But the firm said restrictive immigration policies would continue for the next 15 years and halve the historical net migration rates of the past 20 years, meaning they could again reach the low levels seen in 2019.

According to Bain, the behavior of the remaining population has changed partly due to higher prices and affordable alternatives. Gottfredson said half of 16-year-olds today do not have a driver’s license, compared to almost 70 percent of 16-year-olds between 1966 and 1984. This statistic may simply reflect a delay rather than outright rejection; Bain’s research shows that most people are still licensed by age 25.

Still, the share of new vehicle registrations among 18- to 34-year-olds has fallen from 12% in the first quarter of 2021 to less than 10% by mid-2025, according to S&P Global Mobility. Buyers 55 and older account for nearly half of all new registrations and have held the largest share for eight consecutive quarters, the firm said.

“The engine behind this is affordability,” said Craig Daitch, founder and president of Telemetry, a firm that does market research for the auto industry. He added that new vehicle monthly payments have increased 30% in four years, and nearly one in five new vehicles now pays more than $1,000 monthly.

AutoForecast Solutions, a forecasting firm, expects new car sales in the U.S. to remain relatively steady at around 16 million through 2033, the furthest into the future for which the company has published its forecasts.

“Looking into the future, young people are more likely to use Uber or Lyft to get somewhere,” said Sam Fiorani, the company’s vice president of global vehicle forecasting. “We still see groups of young people who enjoy driving and want a new car, but few can afford it.”

If robotaxiing becomes widely available and affordable over the next 15 years, its share of the licensed population could drop 2 to 3 percentage points to 85 percent, according to Bain research. The number of vehicles per driver may decrease from 1.2 to 1.1; This would be equivalent to 10% to 20% of US households losing a vehicle.

The estimates Gottfredson shared with CNBC are revisions. It had previously targeted 2030 as the year when volumes would fall below 14 million, but said it had changed those assumptions because autonomous vehicles were taking longer to arrive than expected.

Population numbers are baked in, though.

“We already know how many people are born 16 years from now and how many people will be of driving age at 16. And so we can say with pretty certainty that by 2040, we’re going to see some decline in the U.S. That decline is even worse in places like Europe and places like most countries in Asia.”

Gottfredson said the most direct indicator of the potential for a future decline is the rate at which vehicles are “deregistered” — the rate at which they are taken off the road and scrapped or exported to another market, as is the case with used vehicles.

According to the Bain report, the disenrollment rate in 2000 was around 6%. By 2025, this rate was around 5%. That rate could drop to 4.4% by 2040, Gottfredson said. This is mainly because vehicles last longer – reaching a record high of 12.8 years on the road by 2025, according to S&P Global Mobility.

This may be reversed. The lifespan of electric vehicle batteries is still uncertain. It’s also unclear how long automakers will be willing or able to update software that’s increasingly vital to new cars.

But with vehicle prices so high, automotive forecasters say the industry will need to find a way to keep vehicles in service.

“Today’s vehicles can’t have a five- to 10-year limitation,” Fiorani said. “It’s impractical for someone who spends $50,000 or $100,000 to have it turn into trash in less than a decade.”

If these trends continue, the automotive industry in the United States is likely to become even more competitive. Consumers currently have the right to choose from approximately 450 nameplates in the country.

“Competition in the United States will be fierce,” Gottfredson said. “There are too many automakers and too many brands competing for consumers. The market will require consolidation.”