U.S. Auto Market Faces Major Shrinkage by 2040, Experts Predict

The U.S. automotive market may never again reach the record sales levels achieved a decade ago, when 17.6 million cars, trucks, and SUVs were sold. According to a report by CNBC citing analysts at Bain & Company, several indicators suggest the market is heading toward a significant contraction, with sales expected to drop by more than two million units by 2040.

Key Drivers Behind the Decline

Bain & Company analysts point to a combination of factors driving this downturn: declining birth rates, shifting consumer behavior, rising vehicle prices, and the growing availability of alternative transportation options. Mark Gottfredson, a partner at Bain, explained that these trends point to a future where automakers will compete fiercely for a shrinking customer base. He noted that the auto industry has historically relied on 1% annual growth tied to population increases, but global government statistics now show slowing population growth, with some countries already recording declines.

Demographic Challenges and Fertility Rates

The U.S. fertility rate in 2025 stands at approximately 1.6 births per woman, below the replacement rate of 2.1, according to the Centers for Disease Control and Prevention. While this rate is not as low as in some European or Asian countries, it still signals a long-term demographic challenge. Gottfredson described the situation as "extremely difficult conditions," adding that the industry is transitioning from a growth sector to a declining one, all while technology is revolutionizing every aspect of mobility.

Immigration and Policy Impact

Bain noted that the decline in births has been partially offset by relatively high immigration levels, historically averaging around one million people per year. However, the firm expects restrictive immigration policies to persist over the next 15 years, potentially cutting net immigration rates in half compared to the 20-year average and returning to 2019 levels. This slowdown in immigration will further exacerbate the contraction in the auto market.

Changing Consumer Behavior and Driving Habits

Consumer behavior is also shifting, driven by rising car prices and the availability of cheaper alternatives such as ride-sharing and e-bikes. Gottfredson highlighted that only half of today's 16-year-olds obtain a driver's license, compared to 70% of teens in the same age group between 1966 and 1984. Bain's research suggests this is more of a delay than a permanent rejection, as most individuals eventually get licensed by age 25. Nevertheless, the declining rate of new vehicle registrations among younger demographics remains a worrying sign for the automotive industry.