US auto market shrinkage

What happened: The U.S. auto market is projected to shrink significantly by 2040, driven by factors such as falling birth rates and changing consumer behavior. This trend is already evident in recent sales figures. General Motors (GM) reported a 4.2% decline in U.S. sales in Q2 2023, citing a smaller EV market, discontinued vehicles, and inventory constraints. Meanwhile, the most affordable new vehicles are disappearing, with the $20,000 car accounting for just 0.2% of new-vehicle sales in 2025.

Market impact: This narrative affects automakers and dealerships, particularly those heavily reliant on the U.S. market. The shift in consumer preferences towards pricier vehicles and electric vehicles (EVs) is driving demand away from traditional, affordable models. This trend could lead to reduced sales and profitability for automakers, as well as changes in their product portfolios. It also presents opportunities for companies focused on luxury and EV segments.

What to watch next: Investors should monitor GM's Q3 earnings release, scheduled for August 2023, to gauge the impact of the market trends on its financial performance. Additionally, the introduction of new, affordable EV models by major automakers, such as Ford's upcoming Mustang Mach-E, could influence the narrative. Lastly, keep an eye on U.S. new vehicle sales data, as any sustained decline could reinforce the bearish thesis.