A perfect storm could lead to a smaller automotive market in the United States by 2040, according to forecasters, while it could also be much more competitive. Bain and Company have forecast why this might happen, with other analysts predicting a sharp drop in sales by 2040 as well.
This would be in sharp contrast to the record 17.6 million cars, SUVs, and trucks sold in the United States in 2016. Forecasters say that this is a number we may never see again, and it is widely predicted that the market will continue to shrink further over the next 10-15 years.
The findings were shared by CNBC, and it’s possible that automotive manufacturers will soon be competing for a much smaller share of a customer base, which will only increase the competition between all the individual manufacturers as time goes on.
This is what led Bain & Company to predict the ‘perfect storm’ that they see incoming. It ties in with a slowdown in population growth, with some countries already seeing declines. If that decline decreases and goes down further, an even smaller market could be on the way.
Why the American Automotive Market Will Shrink by 2040
Mark Gottfredson, a partner at Bain & Company, said that it is a reduction in population growth that is mostly going to be to blame for this decrease in the market. “It starts with the population declines. You’re no longer a growth industry. You’re a declining industry. You’re a declining industry at a time when the technology is disrupting everything,” he told CNBC.
With the automotive industry depending on an annual growth of one percent, any decrease in that could have a big impact in terms of sales. Population growth is already slowing in many countries, and in some it is actually going down. The U.S. fertility rate in 2025 was about 1.6 births per woman, down on the replacement rate of 2.1. High immigration has offset this, but tighter immigration policies could see that reversed.
Higher prices and a lack of affordable alternatives are also playing a part in this prediction. From 1966 to 1984, around 70 percent of 16-year-olds had a driver’s license. In 2026, that has dropped to less than half. In 2021, new vehicle registrations among people aged 18 to 34 were at 12 percent in the first quarter of 2021, and by mid-2025, that had dropped to 10 percent.
Affordability Is Also Playing a Part in the Shrinking Market
Craig Daitch, founder and president of Telemetry, told CNBC that affordability is also to blame. “The engine behind it is affordability,” he said. Nearly one in five new vehicles requires a payment of over $1,000 a month, something that fewer people can afford on top of bills, insurance, gasoline prices, etc. According to AutoForecast Solutions, U.S. new car sales should at least flatline at around 16 million through to 2033.
However, a lot of young people are more likely to use an Uber or Lyft to get to places in America, rather than buy a car. Large numbers of young people enjoy driving and want a new vehicle, but they have been priced out of being able to do so. The potential decline in the market could be even worse in Europe and in Asia, so America might not even be in the worst place.
Vehicle Longevity May Also Play a Role
The longevity of vehicles could also have a hand in how the market shapes up. Auto forecasters have also said that, with car prices so high, companies need to ensure they can stay in service for 10 years and beyond, whether they are EVs, hybrids, or purely internal-combustion powered. With around 450 nameplates already available in America right now, the competition in a smaller market could really heat up.