The automotive industry is facing a perfect storm of challenges that could lead to a significantly smaller U.S. auto market by 2040. This is according to analysts at Bain & Company, who predict a decline in sales of over 2 million units by that year. The primary drivers of this potential downturn include falling birth rates, behavioral changes, high car prices, and a growing array of alternatives. These factors are creating a competitive landscape where automakers will have to fight for a shrinking customer base.
Historically, the auto industry has relied on population growth for its annual 1% growth rate. However, global statistics show that population growth is slowing, and some countries are already experiencing declines. Mark Gottfredson, a partner at Bain & Company, describes this as a "perfect storm" where the industry is facing a declining market at a time when technology is disrupting everything.
The U.S. fertility rate in 2025 was about 1.6 births per woman, which is below the replacement rate of 2.1, according to the Centers for Disease Control. While immigration has helped offset this, Bain predicts that restrictive immigration policies will last for the next 15 years, cutting net migration rates in half. This could lead to a return to low migration levels seen in 2019.
Behavioral changes among the remaining population are also contributing to the market decline. For instance, half of 16-year-olds today don't have a driver's license, compared to nearly 70% in the 1960s and 1980s. This could reflect a delay rather than a total refusal, as most people still get licenses by age 25. However, the share of new vehicle registrations among 18-34-year-olds has fallen from 12% in 2021 to under 10% by mid-2025, according to S&P Global Mobility.
Affordability is a significant factor in this shift. New vehicle monthly payments are up 30% over four years, and nearly one in five new vehicles now carries a payment over $1,000 a month. This has led to a change in consumer behavior, with buyers 55 and older accounting for nearly half of all new registrations and holding the largest share for eight straight quarters.
The introduction of robotaxis could further disrupt the market. If widely available and affordable in the next 15 years, the share of the licensed population could drop by 2-3 percentage points, and the number of vehicles per driver could drop from 1.2 to 1.1. This would mean 10-20% of U.S. households shedding one vehicle.
AutoForecast Solutions predicts U.S. new car sales to stay relatively flat at around 16 million through 2033, with younger people more likely to use ride-sharing services like Uber or Lyft. Sam Fiorani, vice president of global vehicle forecasting, notes that while some young people still enjoy driving and want a new car, fewer can afford it.
The longevity of electric vehicle batteries and the willingness of automakers to update software are also uncertain. However, with vehicle prices as high as they are, the industry will have to find a way to keep cars in service for longer periods.
The auto industry's future in the U.S. is likely to become more competitive, with consumers having a choice of about 450 nameplates. Gottfredson predicts that the market will have to consolidate, with fierce competition among automakers and brands.
